While the CBEC service tax advertisement has brought relief for distributors, AMCs are worried that they will have to take this hit on themselves. To discuss this issue, AMFI board is going to meet in the upcoming board meeting scheduled to be held on August 13.
HN Sinor, AMFI, CEO has confirmed this development. “We are evaluating this issue. It would be discussed in the upcoming board meeting.”
The issue of service tax has again come to light following the print advertisement which appeared in a few newspapers release by Central Board of Excise & Customs (CBEC) through Directorate of Advertising & Visual Publicity (DAVP) Government of India. The advertisement has clarified that mutual fund distributors are not liable to pay service tax and explicitly stated that fund houses have to bear service tax.
However, majority of fund houses to whom Cafemutual spoke to are still confused that who will bear the service tax - distributors or mutual fund houses.
Fund houses are divided in their opinion. While some fund houses are of the view that the government has clarified that MF companies have to bear the service tax, other are saying they will continue to maintain status quo. Also, a few AMCs have declined to comment on this issue.
A CEO of a large fund house said that his fund house is evaluating the issue. “It’s a major issue for mutual fund industry. We are in talk with tax experts and AMFI. We are hopeful of sorting it out soon.”
Another CEO of a private sector fund house seconds the view and said that his fund house will continue to follow AMFI’s guidelines till the time they get clarity. “We will follow the industry norm and maintain status quo on this issue.” Earlier, AMFI had asked fund houses to pass the service tax burden on distributors. When asked what if fund houses have to bear the service tax burden; he said, “We have to find out how to refund the deducted service tax to distributors and how can we set off it.”
The sales head of a large fund house believes that it is difficult to interpret the print advertisement and draw a conclusion out of it.
A Mumbai based Chartered Accountant said that AMCs can set off their service tax against other services. However, many fund officials believe that there are a lot of operational issues in setting off service tax. “We had to wait for five years to get refund due to procedural issues. It’s a cumbersome task. Also, there is a huge difference between proportion of refund and payments made,” said the sales head of a foreign fund house.
