Budget 2015 brought mutual funds distribution under the ambit of ‘services’, and hence eligible to pay service tax. The service tax rate then was 12.36% and was paid using the reverse charge mechanism. Under this, the onus of paying the service tax was with fund houses, which deducted the tax and paid it to the government. It then gave the net amount to the distributors. Beginning April 2016, the forward charge mechanism has been put in place.
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