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what is applicability of service tax to mutual fund agents

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Sushil Upadhyay asked almost 3 years ago

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 narahari answered almost 3 years ago

In a public announcement, the Central Board of Excise and Custom (CBEC) said mutual fund agents and distributors do not have the liability to pay service tax with effect from April 1, this year. "Liability to pay service tax on service provide by mutual fund agents and distributors is on mutual fund and Asset Management Companies (AMCs) and not on mutual fund agents and distributors," it added. Earlier Finance Minister Arun Jaitley, in his Budget announcement, had proposed to withdraw service tax exemption on services provided by mutual fund agents or distributors of AMCs. Since then, mutual fund distributors have been demanding that they should not be burdened with this service tax as they were upset with the provision.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Anil Dhawan answered almost 3 years ago

A number of investors and experts in the mutual fund industry had high hopes from the Union Budget. However, it will not be an exaggeration to say that the Budget offered a mixed bag to mutual fund investors. It was not as if there was nothing to cheer-one of announcements in the Budget was removal of capital gains tax in case of merger of two mutual fund schemes. Until now, for taxation purposes, when a mutual fund scheme was merged into another, it was considered as sale of units of the existing schemes and purchase of units of the surviving scheme. This resulted in a tax obligation for the investor despite the fact that there was no actual sale. If the investor invests in an equity scheme for less than one year, he has to pay 15% short-term capital gains tax. Gains after a year, which are considered long-term capital gains, are tax-free in case of equities. In case of debt-oriented funds, gains arising out of sale of units before three years are considered short-term capital gains and added to income while gains after three years are considered as long-term nad taxed at the rate of 20% post indexation. The guidelines further state that after the merger, if an investor sells units of the new merged scheme, then his capital gains liability will arise depending on his original investment date and not from the date of the merger. Experts have welcomed this move. "This is a move in the right direction as investors were unnecessary taxed in case of merger but I don't think it will lead to a large number of mergers happening in future," says Waqar Naqvi, CEO, Taurus Mutual Fund. This change is also in line with the Securities and Exchange Board of India's (Sebi's) objective of facilitating consolidation in the industry. Sebi has been asking fund houses to merge identical schemes in order to reduce duplication. Over a period of time, Sebi has eased merger norms to make it easier for fund houses to merge schemes. In 2010, Sebi exempted fund houses from giving the exit option to investors of the surviving scheme if they could convince investors that the merger and consolidation will not lead to a fundamental change in the surviving scheme. The last few years have witnessed a large number of mergers. In the past five years, 76 equity funds of various fund houses have been merged. LOWER DIVIDEND IN NON-EQUITY FUNDS Now, you will receive a smaller dividend as the surcharge on the income distributed by mutual funds has been raised from 10% to 12%. While this will not impact equity funds as there is no dividend distribution tax (DDT) on dividends declared by equity funds, it will affect debt-oriented funds. In case of debt-oriented funds, DDT will now be 28.84% (25% +12% surcharge +3% cess) instead of 28.33% earlier for individual investors. For corporate investors, the DDT will be 34.61%.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 HIMANSHU answered almost 3 years ago

The confusion about service tax on mutual fund distribution has been laid to rest. An advertisement in newspapers on Thursday has finally clarified the position of who should pay service tax on services provided by mutual fund distributors. The advertisement issued by the Central Board of Excise and Customs states that mutual fund agents and distributors do not have the liability to pay service tax, rather the liability to pay is on mutual fund and asset management companies. Mint spoke to an official at the service tax commissioner’s office in Delhi, who clarified that the advertisement has been issued as a public awareness initiative and added that the position on this matter was clarified sometime ago through a notification. The official requested that he not be named. This year’s Union budget saw the service tax exemption being removed for mutual fund distribution. Subsequently, a circular was issued which clarified that the levy would be on the basis of reverse charge—which means that the investor doesn’t have to bear this cost. Since then, there has been a debate within the mutual fund industry on whether the asset manager will bear the cost or the distributor will absorb it in the commission itself. This means that at the time of paying the commission to the distributor, the asset management company could deduct the service tax and pay the net amount. The increased service tax levy at 14% from the earlier 12.36% made matters worse.

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Open uri20170510 32134 1c996lj?1494421732 Anil answered almost 3 years ago

In a big relief for mutual fund (MF) agents, the government has said distributors will not have to pay tax on services provided by them and the liability in this regard would entirely be on the fund houses. In a public announcement, the Central Board of Excise and Customs (CBEC) said that MF agents and distributors do not have the liability to pay service tax with effect from April 1. “Liability to pay service tax on service provide by mutual fund agents and distributors is on mutual fund and Asset Management Companies (AMCs) and not on mutual fund agents and distributors,” it added. Earlier, Finance Minister Arun Jaitley, in his budget announcement, had proposed to withdraw service tax exemption on services provided by mutual fund agents or distributors of asset management companies (AMCs). Since then, MF distributors have been demanding that they should not be burdened with this service tax as they were upset with the provision. With the government raising the service tax rate to 14 per cent from 12 per cent earlier in this year budget, it would have become difficult for distributors as they work on commission basis. At present, there are around 6,000 active MF distributors and 44 AMCs, which together manage assets worth nearly Rs 12 lakh crore. On MF is an investment vehicle with a pool of funds collected from investors to buy securities such as stocks, bonds, money market instruments and similar assets.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Chirag answered almost 3 years ago

In a big relief to mutual fund agents, the government has said distributors will not have to pay tax on services provided by them and the liability in this regard would entirely be on the fund houses. In a public announcement, the Central Board of Excise and Custom (CBEC) said mutual fund agents and distributors do not have the liability to pay service tax with effect from April 1, this year. "Liability to pay service tax on service provide by mutual fund agents and distributors is on mutual fund and Asset Management Companies (AMCs) and not on mutual fund agents and distributors," it added. Earlier Finance Minister Arun Jaitley, in his Budget announcement, had proposed to withdraw service tax exemption on services provided by mutual fund agents or distributors of AMCs. Since then, mutual fund distributors have been demanding that they should not be burdened with this service tax as they were upset with the provision. With the government raising the service tax rate to 14 per cent from 12 per cent earlier in this year budget, it would have become difficult for distributors as they work on commission basis. At present, there are around 6,000 active mutual fund distributors and 44 AMCs, which together manage assets worth nearly Rs 12 lakh crore. Mutual Fund is an investment vehicle with a pool of funds collected from investors to buy securities such as stocks, bonds, money market instruments and similar assets.

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Sushil Upadhyay commented over 1 year ago

Thanking you sir sushil upadhyay

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