Frequently Asked Questions (FAQs) on Service tax applicability on distribution

commission under forward charge mechanism:

1. Who is liable to pay service tax on distribution commission from April 1, 2016?
Ans: Distribution commission on sale of Mutual Fund 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, distributor may avail the benefit of small scale service provider exemption upto
Rs. 10 Lac on gross taxable service subject to fulfillment of prescribed conditions.
3. Does a distributor required to provide self 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 Reliance Mutual
Fund. However, he/she must maintain requisite records as 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: Distributor may avail the benefit of small scale service provider on the basis of their
gross taxable services provided in previous and current financial year. Following are the
scenario to understand the applicability of service tax for distributor.
Gross Taxable Services
(including distribution
commission)
Previous
financial year

Less Than Rs.10

Lac

Distributor may avail benefit of small scale

service provider upto Rs. 10 Lac during current
financial year

More Than Rs.10

Lac

Distributor may avail benefit of small scale

service provider upto Rs. 10 Lac during current
financial year and if distribution commission
exceeds Rs. 10 Lac then on excess amount
distributor is liable to pay service tax.

Less Than
Rs.10 Lac

More Than 10
Lac

Service Tax Applicability

Current financial
year

Less Than Rs.10

Lac
More Than Rs.10
Lac

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 becomes payable to the government for taxable services of a
particular month?
Ans: 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.
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. Where the distributor should submits invoice?

Ans: Distributor is required to submit invoice at the following address:
Reliance Nippon Life Asset Management Ltd.
Asset Manager of Reliance Mutual Fund
Reliance Centre, 7th Floor, South Wing,
Off Western Express Highway,
Santacruz (East) Mumbai 400055
11. 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.
12. What are the 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 ten thousand rupees. [Section 77(1)(e) of the Finance Act 1994]
13. 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.

May 19, 2016

Disclaimer: The information 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 Reliance Mutual Fund/Reliance Nippon Life Asset
Management Limited will not be liable for any issue arising on interpretation and
procedural aspects.

Annexure A

Sample Tax Invoice

Name of the Service Provider
Address of the service provider
Service tax Registration no. of the service provider (PAN based)
Classification of Service
Invoice no:
Invoice Date:

dd/mm/yyyy

Name of Service receiver:

Reliance Nippon Life Asset Management Ltd.

Asset Manager of Reliance Mutual Fund

Service Recipient Address:

Reliance Centre, 7th Floor, South Wing,

Off Western Express Highway,
Santacruz (East) Mumbai 400055
Amount (Rs)

Description

Distribution Commission for sale of Mutual Fund

xxxxxxxx

Add: Service Tax @ 14%

Add: Swatch Bharat Cess @ 0.50%
Add: Krishi Kalyan Cess @ 0.50% (Applicable w.e.f
1.06.2016)

xxxxxxxx
xxxxxxxx
xxxxxxxx

Total:
(Rupees in Words xxxxxxxxxxxxxxxxxxxx)
For Service Provider

Authorized Signatory

xxxxxxxx