Mutual fund redemption not "trading of goods"; no CENVAT reversal or extended limitation under Service Tax

Last updated: 24 February 2026

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The CESTAT has ruled that subscribing to and redeeming mutual fund units does not constitute 'trading of goods' under the Finance Act. The tribunal found that this activity lacks the essential elements of a trade, such as a transfer of title between parties and a fixed price. Consequently, it does not qualify as an 'exempted service' that would require a reversal of CENVAT credit.

Court :
CESTAT New Delhi

Brief :
The CESTAT New Delhi in the case of Godfrey Phillips India Limited v. Commissioner, Central Tax, GST, Delhi East [Final Order No. 51817/2025, order dated December 5, 2025] held that subscription and redemption of Mutual Fund units cannot be considered "trading of goods/securities" under Section 66D(e) of the Finance Act, 1994 as it lacks transfer of title, involves unit cancellation/relinquishment rather than sale/purchase to third party, and thus does not qualify as "exempted service" requiring proportionate CENVAT credit reversal under Rule 6(3) of CENVAT Credit Rules, 2004.

Citation :
Final Order No. 51817/2025, order dated December 5, 2025

Daily Limit Reached