Service tax on mutual fund sub broker

[ROHIT GOEL]

One of the clients was providing sub broking services to mutual fund brokers and received commission/sub brokerage on the same.

As per the client, the sub brokerage in its case was exempt from service tax under sno 29(a) of Notification no. 25/2012 which covers services provided by sub broker to stock broker.

The definition of Sub broker as per the NN is deemed to be same as per Sebi regulations as per which it means any person assisting a stock broker/trading member in transactions in securities. In turn, securities also include mutual funds.

However stock broker as per the same includes person who has trading rights in a stock exchange. The mutual fund broker to whom services of sub brokerage were provided, was not having trading rights but instead is only registered as MF advisor with AMFI as per law.

Therefore opinion is requested whether the service tax exemption would be available or not in case of mutual fund sub broker?

AI Summary

Service tax liability for mutual fund sub-brokers shifted from reverse charge to forward charge, creating exemption ambiguity.
From 1 April 2015 mutual fund sub-broker services became taxable; for 1 April 2015-30 March 2016 tax was payable under the reverse charge mechanism by the mutual fund/AMC under Notification No.30/2012-ST (entry 1B), and entry 1B was omitted with effect from 1 April 2016 so that thereafter service tax is leviable on a forward charge basis.