In a major relief to mutual fund distributors, Central Board of Excise & Customs (CBEC) has exempted distributors from the purview of service tax with effect from April 1, 2015. In a print advertisement published in newspapers - ‘Deccan Herald’ and ‘Mint’ , CBEC has clarified that service tax burden has to be borne by the AMCs.
The advertisement reads, “Liability to pay service tax on service provided by mutual fund agents and distributors is on mutual fund and asset management companies (recipients of the services) and not on mutual fund agents and distributors. The said service tax paid by mutual funds and asset management companies is available as credit to them for paying service tax on their output services.”
The earnings of mutual fund distributors took a hit with the Budget proposal to withdraw service tax exemption given to services of mutual fund distributors to AMCs. Also, adding to their woes, the service tax was hiked from 12.36% to 14%. Ever since the Budget 2015, there is a debate among distributors as to who will be liable to pay this tax – distributor or AMC.
Cafemutual was the first to report about a notification dated February 28, posted on Central Board of Excise and Customs (CBSE) site which stated, “Accordingly, service tax in respect of mutual fund agent and mutual fund distributor services shall be paid by the asset management company or, as the case may be, by the mutual fund receiving such services.”
Legal experts said that distributors who had paid service tax can request for refund.
