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Non-executive directors of a company need not fork out service tax on the services rendered by them to a company.
Service tax will now be paid by the company under ‘reverse charge’ mechanism, the Finance Ministry has said.
A reverse charge mechanism involves the recipient of service paying the service tax rather than the service provider.
After the ‘negative list’ system of service tax was ushered in on July 1, the general legal opinion was that any remuneration received by non-executive directors from a company would attract service tax. This would include payments received for attending board meetings, commission etc.
The Finance Ministry has now brought relief to such non-executive directors by shifting the burden of service tax payment on to the company, which is the recipient of services.
This would imply that the company concerned would have to go through the compliance burden and register itself with the service tax authorities.
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