Service Provided by Director of Company Taxable - Company Will Pay tax, but from when?
NOW there is no doubt - the Directors of a Company are liable to pay Service Tax, but the tax will be paid by the company. Government has amended Notification No. dated 20.06.2012, to notify the service provided by a director to the Company as a service for which Service Tax has to be paid by somebody other than the service provider as stipulated in Section 68(2) of the Finance Act 1994. The extent of tax payable by the recipient is also notified as 100%.
This means that for the services provided by a Director to the Company, the entire tax payable has to be paid by the Company.
Now this notification amending Notification No. , was issued on 07.08.2012. The service by director to the Company was taxable from 1st July 2012 and till6th August 2012, there was no reverse charge mechanism.
So, for the payment received by the Director for July, he has to pay the tax and for the six days in August also, he has to pay the tax. From 7th August, the Company will pay the tax!!! All the directors have to obtain registration for payment of service tax for one month 6 days, file ST 3 and then surrender the registrations probably only after auditing their accounts for correctness of payment!
And we have a Finance Minister who speaks of clarity in taxation!!!.
Notification No., Dated: August 7, 2012