9911796707
TMI Blog2025 (4) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 section 17 (2) of the CGST Act, 2017 read with rule 42 of the CGST Rules, 2017. To substantiate this averment, the applicant has made the following submissions viz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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) TMI 192-DHC. * M/s. Cognizant Technology Solutions India P Ltd 2024 (9) TMI 922-CESTAT Chennai. * M/s. Siegwerk India P Ltd 2024 (10) TMI 220-CESTAT New Delhi. * M/s. Ponni Sugars Erode Ltd 2024 (5) TMI 1350 CESTAT Bangalore. * M/s. Instakart Services P Ltd 2024 (3) TMI 1350 CESTAT B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. [Explanation .- For the purposes of this sub-section, the expression "value of exempt supply" shall not include the value of activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 are neither goods nor services, the redemption of mutual funds cannot be termed as exempt supply; that for a supply to qualify as an exempt supply, firstly it must fall within the scope of 'supply'. 16. A conjoint reading of sections 2(47), which defines exempt supply, 2(78) which defines non taxable supply and section 7 which defines supply, leads us to a conclusion, that securities not being goods or services, would not fall under the ambit of exempt supply. 17. Interestingly, however, in the submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 paid on common inputs and input services used in relation to the subscription and redemption of mutual fund. Now section 17, envisages a situation wherein the goods or services or both that are used partly for effecting taxable supplies and partly for exempt supplies, the value of exempt supply is to be computed in terms of section 17 (3), ibid and resort is thereafter to be taken to Rule 42. 20. The term redemption is not defined. The applicant has also not provided anything in this regard except for some dictionary meaning. The res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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%20redemption%20refers% 20to%20the%20process%20where%20an%20investor,returns%2 0or%20principal%20amount%20invested. * Association of Mutual Funds in India * Association of Mutual Funds in India (AMFI) is a non-profit industry body of the asset management companies (AMCs) of all Mutual Funds in India that are registered with Securities and Exchange Board of India (SEBI). * AMFI was incorporated on August 22, 1995 under section 25 of the Companies Act. 1956 (corresponding Section 8 of the new Companies Act, 2013), as a non-profit organisation. NET ASSET VALUE (NAV) WHAT IS NAV? HOW IS THE APPLICABLE NAV DETERMINED? WHAT IS SALE AND REPU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 scientific meaning of the terms or expressions used but to their popular meaning, that is to say, the meaning attached to them by those dealing in them. 22. The averment therefore that redemption of mutual fund and sale of security, a term used in the explanation for computing the value of exempted supply is not same, fails. We hold that redemption as is mentioned in the websites quoted and also in general parlance is nothing but sale of units to the 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 this case the applicant. 23. Since this was the primary contention on which the applicant was basing his next averment that redemption not being akin to sale, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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