Service tax on mutual fund agent

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 March 2015 SIR, I AM CONFUSED REGAEDING SERVICE TAX ON MUTUAL FUND COMMISION . WHO WILL PAY SERVICE TAX OR ON WHICH AMOUNT

ACCORDING TO ME MUTUAL FUND AGENT WILL PAID SERVICE TAX ON COMMISION EARNED BY HIM

BUT FROM WHOM HE WILL COLLECT THIS AMOUNT

PLEASE CLARIFY THIS

Querist : Anonymous

Querist : Anonymous (Querist)

16 March 2015 SIR, I AM CONFUSED REGAEDING SERVICE TAX ON MUTUAL FUND COMMISION .
WHO WILL PAY SERVICE TAX OR ON WHICH AMOUNT
ACCORDING TO ME MUTUAL FUND AGENT WILL PAID SERVICE TAX ON COMMISION EARNED BY HI
M
BUT FROM WHOM HE WILL COLLECT THIS AMOUNT

PLEASE CLARIFY THIS

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
Follow

24 July 2025 Here’s a clear explanation about **Service Tax on Mutual Fund Agent Commission** (as per the old Service Tax regime before GST):

---

### Who pays Service Tax on Mutual Fund Commission?

* **Mutual Fund Agent (Distributor)** is liable to pay service tax on the **commission earned** by him from the mutual fund company.
* The **service tax is on the commission amount received by the agent**, not on the total transaction value or the investment amount of the customer.

---

### Can the agent collect Service Tax from the investor (customer)?

* **No**, generally the mutual fund agent **cannot charge or collect service tax from the customer/investor** separately.
* The agent pays the service tax **out of the commission he earns**; it is his liability.
* The mutual fund company pays commission to the agent **net of service tax**, or the agent adjusts service tax liability on his commission.

---

### Summary:

| Party | Liability | Amount on which service tax is paid | Collection from investor? |
| ----------------- | ------------------------------ | -------------------------------------------- | ------------------------------------------- |
| Mutual Fund Agent | Pays service tax on commission | Commission received from mutual fund company | No, service tax not collected from investor |

---

### Why?

* Commission received is a **taxable service** under "Business Auxiliary Services" or "Commission Agent Services" under service tax.
* Service tax law requires the **service provider** (agent) to pay service tax on the service provided (commission earned).
* Since commission is income to the agent, **service tax is calculated on commission income**.

---

If you want, I can also help with how to calculate or show this in accounting entries. Would you like that?

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now