Lakshmi Kumaran & Sridharan AttorneysAn ISO 9001 / 27001 certified law firm

Reverse charge in Service Tax extended to Directors’ & Security Services

10th August, 2012

Companies receiving services of directors and business entities registered as body corporate receiving security services from an individual or HUF or partnership firm or AOP have been made liable for payment of service tax under the reverse charge mechanism. Notification Nos. 45 & 46/2012-S.T., both dated 7-8-2012 issued by the Central Board of Customs & Excise, amend the earlier notifications specifying quantum of liability under such mechanism and the Service Tax Rules to specify such liability.    

After the introduction of negative list based service tax regime from 1st of July this year, the issue of Service Tax liability of directors of a company for the services provided to the company in which they hold directorship, has been under the consideration of the Indian Government and comments from the stake-holders have been invited by 24th August, 2012.    

In respect of both the services, the service recipient will not be eligible for small scale exemption. It means that even if the value of services received is less than Rs. 10 lakhs in a financial year, the service recipient is still liable to pay service tax.    

Security service has also been defined now in the Service Tax Rules, 1994 and it includes services of investigation, detection or verification of fact or an activity.
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