Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: due date for vat payment :: list of goods taxed at 4% :: VAT Audit :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT RATES :: empanelment :: ACCOUNTING STANDARDS :: Central Excise rule to resale the machines to a new company :: TDS :: articles on VAT and GST in India :: ACCOUNTING STANDARD :: cpt :: ARTICLES ON INPUT TAX CREDIT IN VAT :: TAX RATES - GOODS TAXABLE @ 4% :: form 3cd
Direct Tax »
 CBDT issues final rules for taxing share buy back by companies
 CBDT issues final rules for taxing share-buyback
 The direct tax collections up to September, 2016 are at Rs. 3.27 lakh crore which is 8.95% more than the net collections for the corresponding period last year.
 IDS is tremendous success: CBDT chief Rani Singh Nair
 Submit monthly data of appeals disposed of: CBDT to officers
 Direct tax mop-up jumps 9 per cent in H1, indirect tax up 26 per cent
 Income tax department slams notice on five Mumbai-based exporters over offshore accounts
 Redress TDS mismatch grievance of taxpayers: CBDT
 Tax department changes rule for accommodating deductions for deferred spectrum payment
 Tax dept renotifies income computation, disclosure standards
 Sushil Chandra to be the next CBDT chief

Service tax burden still with MF distributors
September, 11th 2015

The service tax issue has returned to upset the 90,000-strong mutual fund (MF) distributor community.

In a note sent on Tuesday, the Association of Mutual Funds in India (Amfi) asked fund houses to continue the current practice in collection and payment of service tax, and continue deducting the 14 per cent tax from the commission paid to distributors.

Last month, the Central Board of Excise & Customs (CBEC) had put out advertisements that asset management companies (AMCs) would have to bear the service tax burden. Distributors took this to mean they would be exempt from paying the tax from their own pockets.

ALSO READ: Mutual Funds turn net buyers for 16 straight months

ALSO READ: Mutual funds make hay even on a cloudy day

ALSO READ: Things to know before redeeming your mutual fund investment

However, in a recent meeting between Amfi and CBEC, the latter clarified it was not concerned about who bore the tax, as long as it was collected. “The loading of service tax in the commission amount is a subject matter of commercials between two parties and service tax authorities have nothing to do with it,” it said.

In a note to its members, Amfi asked fund houses to maintain status quo on the current practice in collection and payment of the tax, being paid by AMCs/MFs under the reverse charge mechanism. This involves deducting it from the commission paid to distributors and depositing it with the tax authorities.

“It’s back to square one for the distributor community. We are hoping this is not the end of the matter and that we can take it up again with Amfi and market regulator Sebi,” said a senior official from a top distribution house.

Amfi says status quo to continue, after meeting with CBEC; latter will re-examine matter on Cenvat credit after fresh representation

Amfi recently met CBEC to clear the confusion surrounding the latter's service tax advertisement issued last month

CBEC clarifies that it is not concerned about who “bears” the service tax as long it is “collected”

MFs will continue to deduct service tax from commission paid to distributors

The status quo is a body blow to the 90,000 strong distributor community

For bearing the service tax, AMCs might have had to increase the asset management fees by 10-20 bps

According to Niren Shethia, director at PwC, usually under any tax law, the government fixes responsibility on who will ’pay’ the tax, and not on who will ’bear’ the tax. “Paying tax is a contractual agreement between the service provider and service receiver or between the buyer and the seller. The CBEC in its advertisement used the word ‘borne’ by the AMCs, which was incorrect. They have rightly clarified that the person who will ‘bear’ the tax is not their concern.”

Added a chief executive of a top fund house: “If AMCs had to bear the service tax, they might have to increase the management fees by 10-20 basis points. This, in turn, will require the market regulator’s permission, causing further delays in tax collection and payment.”

Further, on the subject of Cenvat credit, CBEC said it would examine the matter in greater detail after Amfi made a fresh and detailed representation. “Mutual fund entities are not eligible to avail any credit of distributors’ commission. Further for AMCs, admissibility of credit depends upon the facts of each case and contractual arrangements,” said Shethia.

The recent meeting between Amfi and CBEC was held to clear the confusion surrounding the advertisement. Amfi pointed out that the word “bear” in the ad was taken by distributors/agents as a mandate for AMCs/MFs to bear the service tax. The line in the ad stating that the service tax paid by MFs would be available as credit on output services had also created confusion. The sectoral body observed that while the advertisement was issued, no notification or circular was subsequently released for clarification.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Experience

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions