prpri Company liable to pay service tax on services received from its directors Company liable to pay service tax on services received from its directors

Company liable to pay service tax on services received from its directors & Recipients of security services to discharge 75% of service tax liability

Notification No. 30/2012 ST dated 20.06.2012 specifying the services in respect of which service tax is to be paid under reverse charge has been amended to include the following services within its ambit:
a) Services provided by a director of a company to the said company and
b) Security services
Whole of the service tax will have to be paid by the company receiving the services of director while in case of security services, 75% of service tax will be paid by the service receiver and 25% will be paid by the service provider.
Consequential amendments have been made in rule 2(1)(d) of the Service Tax Rules, 1994 which defines person liable for paying service tax.
Further, “security services” has been defined as services relating to the security of any property, whether movable or  immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any fact or activity.

Company receiving services from the directors are being brought into tax net as new Notification No. 45/2012-ST, dated 7-8-2012 has clarified that in respect of services provided by the directors to company, liability to pay service tax would be on the company under reverse charge. Companies would be required to pay service tax on gross amount paid to directors. However, question arises whether all payments made by the company to directors would be covered by above reverse charge provisions.

In our view, services provided by directors as employee in the course of employer- employee relationship would not be covered by the said provision as employer-employee relationship activities are already excluded from the definition of service itself under section 65B (44) of the Finance Act.


Payment of service tax – service tax payable on specified services – amendment in notification no. 30/2012-st, dated 20-6-2012

Notification No. 45/2012-ST, dated 7-8-2012

In exercise of the powers conferred by sub-section (2) of section 68 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 30/2012-Service Tax, dated the 20th June, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 472 (E), dated the 20th June, 2012, namely:-

In the said notification,-

(a)  in para I, in clause (A),-

  (i)  after the sub-clause (iv), the following sub-clause shall be inserted, namely :-

“(iva) provided or agreed to be provided by a director of a company to the said company;”;

 (ii)  in sub-clause (v), after the words “manpower for any purpose”, the words ” or security services” shall be inserted.

(b)  in para II, in the Table,-

(i)  after Sl. No. 5, the following S. No. and entries shall be inserted, namely:-

“5A in respect of services provided or agreed to be provided by a director of a company to the said company Nil 100%”

(ii)  in Sl. No. 8, in the entries under the heading ‘Description of a service’, after the words “manpower for any purpose”, the words “or security services” shall be inserted.

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  1. Ganesh says:

    Required Help of Expert,

    base on the above reverse-charge-mechanism, Company has to pay service tax on the behalf of the director who is providing professional services.

    my doubt is;
    Suppose company pay professional fess to director Rs.1,00,000/- + service tax Rs.12,360/- i.e. Total Professional fess Rs.1,12,360/-.
    On which amount company has to deduct tad u/s 194J.
    Whether on Rs.1,00,000/- or on Rs.1,12,360/-

    X X X X X Most urgent X X X X X
    My email id
    Contact no. +91 8828533657

  2. B.Sreenivasa Rao says:

    Finance Act,1994, defining the service, exempted services of employees to employer from service tax. If so, how the Government bring the services of directors, when they are emplyees, into service tax perview by specific notification in contravention of Finance Act,1994 when the Government is obliged to impement the Law as approved by Parliament, of course, with harmonious powers. Therefore, I am of the opinion that the said notification bringing directors services into service tax perview would not stand before judiciary.

  3. Nipun Jain says:

      Greetings !
      There is a query on service tax matter, to which I find YOU are the best person to ask for:
        ” SERVICE TAX LIABILITY on school buses carrying children, when transportation charges are collected by school.  School buses are registered in the name of school but owned by contractor.  Contractor is being paid by school on monthly basis for ferrying school children. Questions are:
                 1.  If service tax is applicable or not ?
                 2.  If yes, then payable by school or contractor ?
                 3.  If basis exemption limit of Rs. 10.00 lacs is applicable per contractor?  
    Hope to get the reply soon.
    With warm regards

    CA Nipun Jain

  4. Arun says:

    Will all the Directors come into this effect, or is it only for the Non – Executive Directors and the Independent Directors who are not the Employees of the Company. Kindly Explain, with any government order, if any.. Thanks. 

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