No GST ITC on Inputs for Mutual Fund Transactions: AAR
No GST ITC on Inputs for Mutual Fund Transactions: AAR
The Gujarat High Court has held that the applicant is not eligible to avail input Tax credit (ITC) of tax paid on inputs & input services used in relation to the subscription and redemption of mutual funds and also required to reverse the ITC on common inputs and input services used in relation to the subscription and redemption of mutual funds as per Section 17 (2) under GST Act.
The bench of Kamal Shukla and P.B. Meena has observed that redemption as is mentioned in the websites quoted and also in general parlance is nothing but sale of units to the Asset Management Company (AMC). It does not matter by which nomenclature such a transaction is known until broadly it is a sale in other words cessation of ownership of the units by the unit fund holder, in the case the applicant.
The applicant, Zydus Lifesciences avails ITC in terms of sections 16 & 17 of the CGST Act, 2017.
The applicant, to ensure optimum utilization of surplus cash/idle funds lying in excess of their fixed & working capital requirements, invests the same by subscribing to units of various mutual funds floated by Asset Management Company [AMC].
These units are either purchased directly from the fund house or through an authorized broker. When the need for liquid cash arises, the applicant redeems the mutual fund either through the fund house or authorized brokers. The 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.
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.
The applicant sought the advance on the issue of 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.
The AAR held 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 paid on common inputs and input services used in relation to the subscription and redemption of mutual fund.
Ruling Details
Applicant Name: M/s. Zydus Lifesciences Ltd
Date: 21/03/2025
Mariya is the Senior Editor at JurisHour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.
