CIR. NO.66/15/2003-CX(ST), DT. 05/11/2003

Applicability of Service Tax on commission income earned on distribution and marketing of units of mutual fund.

I am directed to say that some doubts have been raised regarding application of service tax on the activity of Mutual Fund Distribution as to whether:

(i) The commission received by distributors on mutual fund distribution is liable to Service Tax under the category of Business Auxiliary Services?

(ii) The services provided is exempt from service tax in terms of Ntf. No. 13/2003 dated 20.6.2003?

In this connection, it is clarified that the services provided as referred above are primarily in nature of the services of commission agent in relation to clause (ii) and (iv) of the category of services mentioned in the definition of Business Auxiliary Services and hence should be leviable to service tax under this category. This activity does not get covered under exemption Notfn. No. 13/2003-ST dt. 20.6.2003 as this is not in relation to sale or purchase of goods. The exemption provided under Notfn. No. 13/2003-ST is applicable only for commission agents dealing in goods.

Field formations and trade may be informed accordingly.

Sd/-
(Manish Mohan)
Under Secretary, CX-4

[F. No. 249/4/2003-CX.4]

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