This document discusses various aspects of service tax in India as it relates to employers and employees, director fees, the reverse charge mechanism, and manpower supply. Some key points include: 1. Services provided by an employer to an employee are taxable if there is consideration. Examples of taxable services are transportation or guesthouse services provided for a fee. 2. Director fees paid to individuals are taxable, while fees paid to entities appointing the director are taxed to the entity. 3. The reverse charge mechanism applies when non-corporate entities provide services to corporate entities. The corporate entity accounts for the tax on a reverse charge basis. 4. Legal and arbitral services provided to individuals

1. Service Tax – Some Discussion
Employer & Employee
Director Fees
Reverse charge mechanism

2. Employer & Employee
• A service provided by an employee to an
employer in the course of employment is
outside the purview of service tax.
• What about service provided by employer to
employee ?
One of the ingredients for the taxation is that
such activity should be provided for
consideration.

3. Service – Employer to employee
• Activities are carried out by the employers for
the employees for a consideration. Such
activities fall within the definition of “service”
and are liable to be taxed unless specified in
the Negative List or otherwise exempted.the Negative List or otherwise exempted.
• services may be provided against a portion of
the salary foregone by the employee. Such
activities will also be considered as having
been made for a consideration and thus liable
to tax.

4. Service – Employer to employee
• The goods or services provided by employer
to employee for consideration would now not
be construed to be for personal use or
consumption of an employee per se andconsumption of an employee per se and
rather shall be a constituent to the taxable
service provided to an employee. The status
of the employee would be as a service
recipient rather than as a mere employee
when consuming such output service.

5. Service – Employer to employee
• Services provided free of cost
Services provided by employee to employee
free of cost is not cover under the preview of
service tax as there is NO CONSIDERATIONservice tax as there is NO CONSIDERATION
Examples:
crèche (Playground, nursery, play school, pre-
school playground etc) , gymnasium, health
club, Gift to employee, awards etc.

6. Service – Employer to employee
• Services provided falling under exemption list:
Services covered under exemption list i.e. part
of notification no. 25/2012 – Mega exemption
or any other notificationor any other notification
Example:
1. Canteen facility without AC and alcoholic
facility
2. Services provided by renting of guesthouse
for personal visit, if the rent is less to
Rs.1000/-

7. Service – Employer to employee
• Services provided for consideration:
Services provided by employer to employee for
consideration or in lieu of salary is taxable
Example:
1. To and fro transportation for consideration;1. To and fro transportation for consideration;
2. Stay is guest house Rs.1,000/- or more;
3. Charges for private usage of official car unless
right to use transferred;
4. Training;
5. Recovery of pay for breach of contract;

8. Service – Employer to employee
• Joint Employment
1) where staff is employed by one or more
employers who normally share the cost of such
employment. The services provided by such
employee will be covered by the exclusionemployee will be covered by the exclusion
provided in the definition of service.
2) The salary and other expenses of the staff on
behalf of other joint employers which are later
recouped from the other employers on an
agreed basis on actual. Such recoveries will not
be liable to service tax as it is merely a case of
cost reimbursement.

9. Service – Employer to employee
• if the staff has been engaged by one employer
and only made available to other for a
consideration, it shall not be a case of joint
employment.
• whereby certain staff belonging to an• whereby certain staff belonging to an
organization is placed at the disposal of a
subsidiary company or any other associate or
group company. Such cases will be covered by
the definition of manpower supply as the
contractual employment continues to be with
the parent company.

10. Reimbursement of expenses
• Reimbursements of expenditure incurred on
by employee behalf of the employer in course
of employment would not amount to a
“service” per se and hence are non-taxable.
• Reimbursements to ex-employees or
pensioners will also be treated at par with
those of current employees when such
reimbursements arise out of the initial
employment contract or are in relation to that
employment.

11. Director expenses
• Payment to director is not excluded from service
tax preview so taxable.
• A director may be appointed either in an
individual capacity or to represent an entity
(including government) who has either invested(including government) who has either invested
in the company or is otherwise authorized to
nominate a director.
• Not Applicable to government regulatory bodies.
• Any monetary or non-monetary consideration i.e.
Sitting fees, Commission / bonus, Company
car/travel reimbursement etc

12. Director expenses
• When a director receives payment in his
personal capacity, the same is liable to be
taxed in the hands of the director.
• where the fee is charged by the entity
appointing the director and is paid to suchappointing the director and is paid to such
entity – Taxed in the hands of the entity
• In case of Govt. nominees, the services shall
be deemed to be provided by the Govt. and
liable to be taxed on reverse charge basis.

13. • Reverse charge mechanism is applicable when
any individual, Hindu Undivided Family or
partnership firm, whether registered or not,
including association of persons, located in
the taxable territory to a business entitythe taxable territory to a business entity
registered as a body corporate located in the
taxable territory. (Corporate received service
from non-corporate)
• Liability of both service provider and service
receiver are independent

14. • Both the service provider and service recipient
are governed by the Point of Taxation Rules
2011 in respect of the service provided or
received by him. Usually it is the invoice orreceived by him. Usually it is the invoice or
date of receipt of payment which is the point
of taxation for the service provider. However
for the service recipient, in terms of rule 7 of
the said rules, point of taxation is when he
pays for the service.

15. Advocates or arbitral tribunals
• Advocates can provide services either as individuals or
as firms. Legal services provided by advocates or
partnership firms of advocates are exempt from service
tax when provided to the following:
• an advocate or partnership firm of advocates providing
legal services (same class of persons)legal services (same class of persons)
• any person other than a business entity
• a business entity with a turnover up to rupees ten lakhs
in the preceding financial year
However, in respect of services provided to business
entities, with a turnover exceeding rupees ten lakhs in
the preceding financial year, tax is required to be paid
on reverse charge by the business entities. (Business
entity includes sole proprietary as well)

16. Manpower supply
• The manpower supply is understood to mean
when one person provides another person with
the use of one or more individuals who are
contractually employed or otherwise engaged by
the first person.the first person.
• There could be certain contracts in which such
manpower is made available to execute another
independent contract by the service provider
• As long as such manpower is not placed
operationally under the superintendence or
control of the recipient, it shall not be a case of
manpower supply