TaxTMI 
TaxTMI 
2025 (4) TMI 227
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....apital requirements, invests the same by subscribing to units of various mutual funds floated by Asset Management Company [AMC]; • that these units are either purchased directly from the fund house or through an authorized broker; • that when the need for liquid cash arises, the applicant redeems the mutual fund either through the fund house or authorized brokers; • that units of mutual funds are not transferred/sold to other buyers unlike equity shares but are returned back to the Asset Management Company; • the applicant receives various inputs and input services, which are commonly received towards both taxable supplies as well as the activity of investment & redemption in the mutual fund units; • that presently the applicant is reversing the proportionate ITC pertaining to common input & input service towards both taxable supplies as well as redemption of mutual funds in terms of section 17 (2) read with Rule 42 of CGST Act, 2017. 3. The applicant, however, is of the view that there is no requirement to reverse the ITC availed on receipt of such common inputs & input services in terms of the provisions of secti....
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....f Suresh Kumar Bansal 2017 (4) GSTL J 128 SC, Eternit Everest Ltd 1997 (89) ELT 28 Mad, Shabina Abraham 2015 (322) ELT 372 SC wherein it is held that in absence of machinery provisions, levy provision becomes unenforceable. 4. In view of the foregoing, the applicant has sought a ruling on the below mentioned question viz: "Whether the applicant is eligible to avail ITC of tax paid on common inputs & input services used in relation to the subscription and redemption of mutual funds?" 5. Personal hearing was granted on 04.12.2024, wherein Ms Priyanka Kalwani, Advocate, Ms Devanshi Sharma, Advocate, Shri Rashmikant Shah and Shri Vaibhav Vahia appeared on behalf of the applicant and reiterated the submission already made in the application. They also submitted a compilation of legal provisions & copies of judgements relied upon. The copies of the judgements submitted have already been relied upon other than the below mentioned judgements viz: • Munjaal Manishbhai Bhatt 2022 (5) TMI 397-GHC. • Mohit Minerals P Ltd 2020 (1) TMI 974-GHC. • M/s. SAL Steel Ltd 2019 9 TMI 1315-GHC. • Suresh Kumar Bansal & Anuj Goyal 2016 (6) ....
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....) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. • Section 17. Apportionment of credit and blocked credits.- (1) Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business. (2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies. (3) The v....
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....l fund. The applicant receives various inputs and input services, which are commonly received towards both taxable supplies as well as the activity of investment & redemption in the mutual fund units. 12. The applicant's contention is that though presently they are reversing the proportionate ITC pertaining to common input & input service towards both taxable supplies as well as redemption of mutual funds in terms of section 17 (2) read with Rule 42 of CGST Act, 2017, it is their belief, that they are not required to reverse the ITC. 13. The applicant's primary averment is that 'money & securities' are neither goods nor services; that redemption of mutual fund cannot be termed as exempt supply, having been excluded out of the scope of supply of goods or services. 14. The definition of goods and services, under section 2 (52) and (102), ibid, is reproduced supra. Now, securities, include units under mutual fund scheme in terms of section 2 (h) (id) of the Securities Contracts (Regulation) Act, 1956. Going through the definition reveals that the term goods and services as defined supra excludes securities. 15. The applicant's next contention is that since the securities a....
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....hat since there is no machinery provision to arrive at the value of exempt supply in case of redemption of mutual fund, the scheme for reversal of ITC fails. 19. We do not agree with the averment owing to the fact that in terms of section 16, prima facie, the applicant is not entitled to take credit of ITC charged on any supply of goods or services or both which are not used or intended to be used in the course of furtherance of business. This is more so since section 16 (1) of CGST Act 2017, reproduced supra, states that every registered person shall be entitled to take credit of ITC charged on any supply of goods or services or both used on intended to be used in the course or furtherance of business. This is an undisputed fact. Now a conjoint reading of the definitions as provided in section 2 (52), 2 (101) and (102), ibid, states that the activity undertaken, i.e. subscription and redemption of mutual funds by the applicant is neither a supply of goods nor supply of services. Therefore, in terms of section 16(1), we find that the applicant is not eligible for availing ITC of tax paid on subscription and redemption of mutual fund and further required to reverse ITC of tax pai....
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.... Bank is a AMFI-registered Mutual Fund Distributor & a Corporate Agent for Insurance products. Source : https://www.hdfcbank.com/personal/resources/learning- centre/invest/what-is-mutual-fund-redemption-and-how-to- redeem-mutual-funds • BAJAJ FINANCE LIMITED What is mutual fund redemption? Mutual fund redemption refers to the process where an investor sells their mutual fund units back to the asset management company (AMC). In simple terms. it involves withdrawing units from a mutual fund scheme to receive the returns or principal amount invested. If you submit your redemption application to the fund house or its transfer agency before 3 pm on market trading days, the same day's NAV will be used to calculate the redemption amount. Requests made after 3 pm will receive the next day's NAV for the calculation. Disclaimer: Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319 Source : https://www.bajajfinserv.in/investments/mutual-fund-redemption# :~: text=Mutual%20fund%20redempti....
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....he existing mutual fund units in any manner. As per SEBI (Mutual Funds) Regulations, 1996, in respect of Open-Ended Schemes, Repurchase Price (commonly referred to as Redemption price) shall not be lower than 95% of NAV. It may be noted that units of Closed Ended Schemes cannot be Repurchased prematurely. Source : https://www.amfiindia.com/investor-corner/knowledge-center/net-asset-value.html#accordion3 As is evident redemption is nothing but sale of mutual fund by the unit holder back to the Asset Management Company[AMC]. 21. Our stand of resorting to common parlance test is substantiated by the order dated 23.9.2021 of the Hon'ble Karnataka High Court in the case of M/s Robo Silicon Pvt. Ltd [STRP No. 24/2019] wherein it was held as under: 14. 'The common parlance test', 'marketability test', popular meaning test' are all tools for interpretation to arrive at a decision on proper classification of a tariff entry. The test, as to what a common man viewing or dealing with the article will understand it to be, would be relevant. The Hon'ble Apex Court has held that while interpreting the entry for purpose of taxation recourse should not be made to the scienti....