Mutual fund agents and their sub-agents will not have to pay service tax from July 1 for distributing or marketing mutual funds.

The Centre's move to provide service tax exemption to mutual fund distributors is being seen as booster dose for the mutual industry, which has been agitated over this levy.

Mutual fund investors too will have cause for cheer as service tax is passed on to them. Distribution of mutual funds attract service tax, although the mutual fund houses in many cases absorb this tax to provide relief to their agents or distributors.

NEGATIVE LIST TOO

Wherever the main agent is exempted, it is natural that even their sub-agents would be exempted, a Finance Ministry official clarified at a service tax conference here.

This service tax exemption for mutual fund distributors will be available even under the negative list regime, which is also proposed to be ushered in from July 1.

Under the negative list approach, the Centre would specify the 17 services that would be specifically service tax exempt. All other services would automatically attract service tax, it was pointed out.

This benefit of service tax exemption for distributors of mutual funds and their sub-agents would be available even in negative list regime, Mr J.K. Mittal, Co-Chairman, National Council on Indirect Taxes, Assocham, told Business Line.

In mutual fund industry, it is common practice for main distributor of mutual funds or the main agent to work through various sub-agents.

The industry was under the notion that only the main distributor agent would be exempt from service tax with effect from July 1.