FAQs ON SERVICE TAX APPLICABILITY ON DISTRIBUTION COMMISSION
1. Who is liable to pay service tax on distribution commission from April 1, 2016?
Ans: Distribution commission on sale of Mutual Fund units has been brought under
forward charge mechanism with effect from 1st April 2016, and the liability to pay
service tax has been cast upon the distributor.
2.
Can a distributor avail the benefit of small scale service provider and what is the
limit?
Ans: Yes, the distributor may avail the benefit of small scale service provider exemption
upto Rs. 10 lacs on gross taxable service subject to fulfillment of prescribed conditions.
3. Is a distributor required to provide declaration certificate to AMC/MF if he/she is
availing benefit of small scale service provider?
Ans: No, the distributor is not required to submit a self- declaration to S B I Mutual
Fund / SBI Funds Management Private Limited. However, the distributor must maintain
requisite records as required/provided by the law.
4. How to compute the threshold of Rs 10 Lac for the benefit of small scale provider?
Ans: The threshold for the benefit of small scale service provider should be computed
by including all taxable services provided by the distributor (including but not restricted
to distribution commission from sale of MF, distribution commission from sale of
Insurance policy, advisory fee and any other professional fee etc.).
5. How distributor may avail the benefit of small scale service provider during
current financial year?
Ans: The Distributor may avail the benefit of small scale service provider on the basis
of their gross taxable services provided in the previous and the current financial year.
Following are the scenarios to understand the applicability of service tax for distributor.
Gross Taxable Services
(including distribution
commission)
Previous
financial year
Less Than Rs.10
lacs
Distributor may avail benefit of small scale
service provider upto Rs. 10 lacs during current
financial year
More Than Rs.10
lacs
Distributor may avail benefit of small scale
service provider upto Rs. 10 lacs during current
financial year and if distribution commission
exceeds Rs. 10 lacs then on excess amount
distributor is liable to pay service tax.
Less Than
Rs.10 lacs
More Than 10
lacs
Service Tax Applicability
Current financial
year
Distributor can not avail benefit of small scale
service provider during current financial year.
Service tax is applicable from day one.
Distribution commission of current financial year
will be subject to service tax.
6. When does service tax become payable to the government for taxable services of
a particular month?
Ans: The Distributor is liable to deposit service tax via e-payment on or before 6th of the
following month from the date of point of taxation except for month of March where the due
date is 31st March.
Point of Taxation prescribed as per rule 3 of Point of Taxation Rule 2011 as follows:
(a) Where Invoice is issued within 30 days from completion of service
(i)
Date of invoice or;
(ii)
Date of payment received
Whichever is earlier.
(b) Where Invoice is not issued or issued after 30 days from completion of service
(i)
Date of Completion of service or;
(ii)
Date of payment received
Whichever is earlier
Example: If a distributor receives distribution commission of April 2016 in May 2016 and
he/she raises the invoice during the month of May 2016 (Before 30th May), then he/she is
liable to pay service tax by 6th June 2016.
Brokerage
April 2016
Brokerage
March 2017
of Paid in May 2016
and invoice is raised
before 30th May
2016
for Whether received in
March 2017 or not
Service Tax liability is Same process till Feb
to be deposited by 6th 2017
June 2016
Service Tax liability is In March, Service tax
to be deposited by is estimated and is to
31st March 2017
be deposited by 31st
March 2017. Excess
payment, if any, can
be adjusted against
subsequent
payments.
7. Is distributor required to issue invoice under forward charge mechanism?
Ans: Yes, it is mandatory for every person who is providing taxable service to issue
invoice as per Rule 4A of Service tax Rules (STR) 1994.
8. Is there any prescribed format for the Invoice/Bill?
Ans: There is no prescribed format for issue of Invoice. However, the invoice/bill/challan
should contain the following information (Rule 4A of the STR, 1994):
i. Serial number
ii. Name, address and registration no. of the service provider.
iii. Name and address of the service receiver
iv. Description and value of taxable service provided or agreed to be provided;
v. The Service tax payable thereon.
A sample invoice providing the requisite details is provided as “ Annexure A”
9. Whether invoice needs to be signed manually or digitally?
Ans: Invoice can be signed manually as well as digitally either by service provider or person
authorized by the service provider. For digital signature, a Distributor is required to obtain
valid digital signature certificate.
10. Is it possible that IFAs give a certificate to the Respective RTAs that their combined
income from all mutual funds is more than Rs.10 lacs and MFs/RTAs can continue to
pay service Tax after getting an invoice raised and signed from them.
Ans : No, the distribution commission e a r n e d o n s e r v i c e s r e n d e r e d t o
Mutual
Funds/Asset Management Companies has been brought under forward charge mechanism
with effect from 1st April 2016, and the liability to pay service tax has been cast upon the
distributors/IFAs.
11. Can the input details of Invoice to be raised on AMCs be sent by RTAs on a monthly
basis to IFAs along with the brokerage payment details so that the same can be
immediately generated, signed and sent back to the respective RTAs/AMCs as may be
necessary.
Ans: SBI Funds Management Private Limited is in the process of developing a portal for all
distributors/IFAs, which will provide a utility for printing invoices by the distributors. The
distributors/IFAs shall be required to register on the portal and provide the necessary
details/documents to facilitate this and it would be a one-time exercise.
12. What is the procedure of registration with the Service Tax Department?
Ans: Registration with service tax department is very simple .This can be done online. The
web site where online registration is to be applied is
https://www.aces.gov.in/Documents/New_Assessee_REG.pdf
13. Is the brokerage paid by SBI Funds Management Private Limited inclusive of service
tax?
Ans: All types of brokerage paid by us is on Gross basis (inclusive of service tax).
14. Where the distributor should submit invoice?
Ans: The Distributor is required to submit invoice at the following address:
SBI FUNDS MANAGEMENT PRIVATE LIMITED
ACCOUNTS & ADMINISTRATION DEPARTMENT
9TH FLOOR, C-38 & 39, CRESCENZO,
G BLOCK, BANDRA KURLA COMPLEX
BANDRA EAST
MUMBAI 400 051
15. How to derive the invoice amount?
Ans: Gross amount of invoice (Inclusive of service tax and cess as applicable) should match
with the amount mentioned in distribution commission statement.
16. Are there any penal consequences if invoice is not issued by distributor?
Ans: If a distributor fails to issue invoice then he/she will be liable for a penalty which may
extend upto Rs.10,000/- (Rupees ten thousand) [Section 77(1)(e) of the Finance Act 1994].
17. If a distributor is paying service tax then is he/she required to file service tax return?
If yes then what is the time limit for filing the same?
Ans: Any distributor who is paying service tax is required to file service tax return on half yearly
basis i.e. for the period from April to September returns should be filed by 25th October and
similarly for the October to March period the returns should be filed by 25th April. In addition to
above there is annual return also, as introduced in the budget 2016.
June 24, 2016
Disclaimer: This FAQ document is provided for general information only. However, in
view of the individual nature of transactions, each distributor is advised to consult his
or her own tax advisors/consultant and SBI Mutual Fund/SBI Funds Management Private
Limited will not be liable for any issue arising on interpretation and procedural aspects.
Annexure-A
INVOICE / DEBIT NOTE
(To be printed on letterhead)
Invoice No:
For the Month:
Date:
To
SBI FUNDS MANAGEMENT PVT LTD
9th Floor Crescenzo, C-38 & 39, G Block
Bandra Kurla Complex, Bandra East, Mumbai 400051.
Description
Amount (Rs.)
a. Upfront
b. Trail
c. Incentive
d. Others
Sub-Total (a+b+c+d)
Service Tax @ 14.00%
Swachh Bharat Cess @ 0.50%
Krishi Kalyan Cess @ 0.50%
TOTAL
-
Rupees
Note: The above amounts are net of adjustments for clawback/recovery/other adjustments, if any.
ARN
PAN
Service Tax Regn. No
:
:
:
For
E&OE
Authorized Signatory
(Signature and Seal)