"Any increase in remuneration of Non-Whole time Director(s) of a Company solely on account of payment of service tax on commission payable to them by the company shall not require approval of Central government...," an official statement by the Ministry said. "...even if it exceeds, the limit of 1% or 3% of the profit of the company...in the financial year 2012-13," it added.
It may be noted that the Finance Act 2012 has introduced Service Tax which is applicable to anyone who provides a Service not covered under the negative/exempted list and if the value of annual revenue is more than Rs. 10 lakh.
The Non-Whole Time Directors of the Company are presently not covered under the exempted list and as such the sitting fee/commission payable to them by the company is liable to Service Tax.
"If such service tax is paid by the company, it will be deemed to be a part of remuneration under section 198 of the Act and would accordingly increase the remuneration amount of such Non-Whole Time Directors. "As per existing provisions of the Companies Act, 1956, companies required the Ministry's approval to increase salaries of part-time directors," it added.