FAQs on Service Tax. The Below Table provides more clarity on the Service Tax Applicability: Current Financial year

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1 FAQs on Service Tax Currently, the liability of payment of Service tax on MF Brokerage is on Mutual Fund/ AMC under reverse charge mechanism for the services provided by a Distributor /Agent. In the recent Budget 2016, liability of AMC or MF is withdrawn and consequently, w.e.f 01/04/2016, Mutual fund distributors / agents are required to pay Service Tax instead of AMC or MF under forward charge mechanism. Below are few FAQs that will help you on the subject matter: Q1: Who is liable to pay Service Tax. A1:A mutual fund distributor/agent having gross receipts of Rs 10 lakhs or above from ALL taxable services ((any service where service tax is applicable for instance commissions received from PMS, real estate, insurance and any other service whether financial or non financial (even if it is under reverse charge or forward charge)) is liable to pay Service Tax. For example, a Partner having MF Brokerage income of Rs. 6 lac plus income from other taxable service of Rs. 5 lac. Viz. Rs. 3 lacs insurance commission (though it is under reverse charge) Rs. 1 lac from PMS brokerage Rs. 1 lac from professional consulting In such a situation, because the total income increases above Rs. 10 lac, he will be liable to Service Tax. In the above example the liability to be discharged by the individual / entity shall be on Rs. 8 lacs at the prevailing service tax rate as the insurance commissions received by agent are under reverse charge and such liability is discharged by the insurance company. The Below Table provides more clarity on the Service Tax Applicability: Aggregate value of Taxable Services provided Preceding Financial Year Current Financial year Service Tax applicability Less or equal to 10 lacs Less or equal to 10 lacs No service tax Less or equal to 10 lacs More than 10 lacs Service tax applicable after 10 lacs More than 10 lacs More than 10 lacs Less or equal to 10 lacs Service tax applicable from Rupee one. No exemption available.

2 Q2: Is a mutual fund distributor/agent required to have registration for Service Tax? A2: Yes, every person liable to pay the Service Tax is suppose to apply & take Service Tax Registration. If a Person is already having a Registration need to only ensure that he/she is also registered in Business Auxiliary Services because MF Brokerage falls under that category. If an individual / entity is not registered under any Service and if in the previous year i.e the income is above Rs 10 lacs from all taxable services including commissions from mutual fund he has to register under Business Auxillary Services. In case an individual /entities total earnings from all taxable service in the FY is below 10 lacs and is not registered under any Service then he shall be liable to register the moment his aggregate income from all taxable services increases over Rs. 9 lacs in any financial year. If he has any income from brokerage/commissions from mutual funds the person/entity is liable to register under Business Auxiliary Services Q3: What will the impact on Brokerage to you? A3: All the Brokerage rates given at NJ shall be exclusive of Service tax. i.e. there shall be no deduction of Service Tax in any AMC. However, if any Partner is falling under Service Tax ambit i.e. his taxable service is above Rs. 10 lacs such Partner shall be eligible to receive additional Service Tax over and above the given brokerage rate on raising of necessary invoices as per Service Tax Rules. For e.g. the Upfront Brokerage rate is 0.50% then for an investment of Rs. 100,000/-, you receive Rs. 500/- as Brokerage (without any deduction.) You are eligible to receive additional Service Tax on Rs 500 /- Commission as mentioned in invoice Rs Add: 14% Rs Add: Swachh Bharat Cess 0.5% Rs Total Amount Rs ========= However, the additional amount of Rs shall be received on raising of necessary invoices and completion of formalities with NJ.

3 Q4. If I fall under Service Tax ambit what registration formalities do I have to do with NJ for claiming Service Tax? A4. You are required to do following... 1 st : Get registration under Business Auxiliary Services (if not registered) 2 nd : If registered or on receiving registration submit copy of the same to NJ. 3 rd : To raise the invoice in the format as provided before the end of every month for the brokerage received in the same month. Q5: Billing in RAP? A5: RAP is also a form of Brokerage only & accordingly Service Tax is applicable. So, even in case you do not Opt for a monthly payment in RAP, you are suppose to raise the Bill to NJ on a monthly basis to claim Service Tax. Q6: Invoice Raising Utility on partner desk. A6: In future, a Utility will be created on Partner Desk which will help you to raise the Service Tax Bill on NJ. You will be in a position to generate Single or Multiple Bill every month on the basis of Brokerage received from NJ. You can also raise invoice through your own accounting system, however in such case you have to keep following points in to consideration: 1. Invoice shall contain details which are mandatorily required as per service tax rules. (we have attached a suggested format) 2. Invoice must not be older than 3 month from the current month. 3. NJ Bill number must be mentioned in the invoice. Q7: Is it advantageous or is an additional compliance for the individuals/entities falling under Service Tax ambit? A7: While the compliance increases for an individual/entity falling under Service Tax Ambit after the forward charge mechanism, however there is a huge benefit of CENVAT credit for e.g. you are also availing certain services to generate mutual fund business and the service provider charges service tax on the same, then your liability reduces to the extent of service tax collected from you by your service provider. To simplify the above point, say your net income (mutual fund commissions) for the FY is Rs 20,00,000 and you received certain taxable services worth Rs. 8 lacs then the table below shows your actual benefit under both forward charge and reverse charge mechanism.

4 Forward Charge Reverse Charge MF commission ST Charged 14.5% NIL Received from NJ Actual Expenses Communication Stationary & Printing Business Promotion ST paid on the same ST payable Net Earnings In the above case there is a net benefit of Rs 1,12,000/- Note: - The rate of service tax is 14.5% (of which 0.5% is Swachh Bharat Cess). From 1 st June, 2016 additional 0.5% is recommended in the Union Budget towards Krishi Kalyan Cess. Please note 0.5% Swachh Bharat Cess is not eligible for CENVAT credit. Q8: What is the due date of Service Tax Payment? A8: The Service Tax Payment date is as follows: Type of Entity Frequency of Payment Date of Payment Companies, Trust, Association, Societies Partnership/LLP/Proprietary Concerns/Individuals/HUFs Monthly Quarterly By 6 th of every month I.e For April month, the Service Tax has to be paid by 6 th of May. Except in case of March, it has to be paid in the same month i.e. 31 st March. By 6 th of the month i.e. For April to June Quarter, the Service Tax has to be paid by 6 th of July. Except in case Jan to Mar Quarter, it has to be paid by 31 st March.

5 Please Note: The above FAQs are only for general guidance to all NJ Partners & NJ will not be responsible for any actionable at Partner's end. All the Partner's are requested to take advise of their Tax Consultants for Compliance of the Service Tax related matters.