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MF News Big relief to mutual fund distributors: No GST until March 2018

Big relief to mutual fund distributors: No GST until March 2018

The GST council defers implementation of reverse charge mechanism (RCM) until March 2018.
Nishant Patnaik Oct 7, 2017

In a major relief to the mutual fund distributors, the GST council headed by the Finance Minister Arun Jaitley has deferred the implementation of reverse charge mechanism (RCM) until March 2018.

In a press release, the government said, “The reverse charge mechanism under sub-section (4) of section 9 of the CGST Act, 2017 and under sub-section (4) of section 5 of the IGST Act, 2017 shall be suspended till 31.03.2018 and will be reviewed by a committee of experts. This will benefit small businesses and substantially reduce compliance costs.”

The move will benefit mutual fund distributors who do not have GST registration number.

The distributors who have already taken GST registration number can cancel it to avail this benefit. However, there is a caveat. Mumbai based CA Yogendra Jain said that mutual fund distributors who have converted their service tax registration number into GST registration number could cancel their existing GST registration, provided they earn less than Rs.20 lakh a year. However, distributors who have recently taken their GST registration number on voluntary basis will have to wait for a year to cancel it, he added.

Earlier in June, AMFI had directed AMCs to deduct GST from July 1 from the commission of distributors who do not have a GST registration number and pass it on to the government.  Currently, fund houses have been following reverse charge mechanism (RCM)  to implement GST for distributors earning less than Rs20 lakh.

For distributors with GST registration, AMCs continue to follow forward charge mechanism, i.e., AMCs will pay the gross commission to them.

In addition, AMFI had clarified that distributors earning less than Rs20 lakh, and selling schemes of a fund that is based outside their home state, will have to obtain a GST registration number. In addition, once a distributor obtains a GST registration number, there will be no exemption. GST has to be paid from Re1, AMFI clarified.

However, with the latest development, mutual fund distributors earning less than Rs.20 lakh a year will be exempted from paying GST.

Another question is that will these distributors get any refund of the GST paid so far under RCM.

Cafemutual spoke to two operation heads of fund houses to understand if the government would refund the money. Both the officials are sceptical about the refund.

“There is no mechanism under which the government refunds the money deducted under RCM. In my view, it is unlikely,” said the operation head of a foreign fund house.

Another operation head said that the government has not mentioned any tentative date to implement these amendments. “We will have to wait for the clarification on this,” he said.

He also said that brokerage for the month of September would be delayed due to absence of clarification. “We are not sure if we deduct the GST from September’s brokerage. It is better to wait for a while,” he said.

Another relief for the mutual fund distributors is implementation of quarterly returns filing. The mutual fund distributors having turnover of less than Rs.1.50 crore can file GST returns quarterly instead of monthly.

71 Comments
Pankaj · 1 week ago
"Hum Lakeer Ke Fakeer nahi hai. " Der Aaye durust Aaye. Modi first fired the bullet. Hopefully missed the target
Sawai Singh · 1 week ago
At least GST Council could understand that mutual finder industry is also able to generate employment at individual level like other SMEs. But our chartered accountants are still not understanding the word"gross turn over" insted they are understanding it with distributors gross annual brokerages.Distributors turnover is his/her gross sales of all AMCs schemes.If they can understand,hope decision makers could spare distributors well before.
laxman kumar · 1 week ago
ONLY 1 suggestion to Arun jaitley ,18% GST on Mutual fund is unjustified ,we request Modi to reduce d GST on mutual fund to 10%
UDAY SHAH · 1 week ago
THERE SHOULD NOT BE ANY GST ON IFA . EVEN SHARE SUB BROKER WE GET GST AMOUNT ADDED BY BROKER WITH OUR BROKERAGE EARNING .SO WE DEPOSIT GST MONEY GIVEN BY OUR MAIN BROKER . SO FOR SUBBROKER NO GST EFFECT. THA SAME PROCEDURE SHOULDBE THERE FOR IFA . OTHERRWISE NO BODY WILL DO MUTUAL FUND BUSINESS AND BECOME IFA BECAUSE IT IS HUGE LOSS TO IFA. SO PL.GIVE YOUR VOICE TO OUR INDUSTRY LEADER. IT IS TOTALLY UNJUSTICE TO IFA. IT SHOULD BE LIKE SHARE SUB BROKER ONLY.
Reply
Bhavana · 1 week ago
What about those distributors outside Maharashtra who are earning less than 20lakhs but took voluntary registration to follow the rule of AMFI/GST. Is it always that those who comply have to suffer. Will we get refund of GST paid now onwards?
laxman kumar · 1 week ago
Take my word ,It's tough to get refund
Balakrishnan · 1 week ago
I have taken GST on voluntary basis, whether i need to pay GST after this amendment?
nisar · 1 week ago
i have to got also GST no. i think earning less than 20 lakhs no need to pay now.. but have to file qly return
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Narayan · 1 week ago
Dear Nishant, Just need a clarification. Does the GST exemption is applicable to distributors who have income of more than 20 lakhs.
r DHRUVA · 1 week ago
Very bad for distributors with GST registation below turnover rs. 20 lac continue to pay from r.1 and no exemption to new GST registation distributorss means it is foolish to register GST NO.
nisar · 1 week ago
no need to pay i think.
Reply
Abhilash jain · 1 week ago
Gst for Mutual fund distributor should not be applicable forever. Our role is to circulate the fund in the industries and goverment already taking the Gst from the company. Its unjustice if govt applicable the Gst on my distributor.
Anish · 1 week ago
Why we should pay GST...we are paying income tax as per slab..so why govt asking to pay GST.....GST should be abolised completely....if IFA earning more than 20Lakh even though GST should not be applicable...we have lots of business expenses.. Staff salary...we need to give gifts to client...from were we should recover this expenses......i will vote for NOTA and all IFA should follow the same....this govt is over confident
Chandan Kumar Singh · 1 week ago
I am agree with you sir..govt has no knowledge about anything.
Reply
Anish · 1 week ago
Why we should pay GST...we are paying income tax as per slab..so why govt asking to pay GST.....GST should be abolised completely....if IFA earning more than 20Lakh even though GST should not be applicable...we have lots of business expenses.. Staff salary...we need to give gifts to client...from were we should recover this expenses......i will vote for NOTA and all IFA should follow the same....this govt is over confident
Anish · 1 week ago
Why we should pay GST...we are paying income tax as per slab..so why govt asking to pay GST.....GST should be abolised completely....if IFA earning more than 20Lakh even though GST should not be applicable...we have lots of business expenses.. Staff salary...we need to give gifts to client...from were we should recover this expenses......i will vote for NOTA and all IFA should follow the same....this govt is over confident
Vishhal Malhotra · 1 week ago
This is an excellent and a welcome move/gesture by present central government. Kudos to them. And now all AMCs / MFs must refund all money they deducted under GST as soon as possible. Specially of those Distributors whose earnings are less than Rs. 10 Lakhs per annum. Thank you.
R. A. Porwal · 1 week ago
Actually AMFI & MF industry is collectively fooling distributors & Govt. by deducting GST from their commission and at the same time availing input tax credit of same GST, this clearly indulging into profiteering at the cost of distributors.
Ankit · 1 week ago
True. RCM gave the benefit of the credit to the amc s. Which was not the case during service tax. AMC s are at the position of profiteering due to this provision.
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Dipen · 1 week ago
Kindly refer to paragraph 6 of the government press release, reproduced hereunder -

“6. The reverse charge mechanism under sub-section (4) of section 9 of the CGST Act, 2017 and under sub-section (4) of section 5 of the IGST Act, 2017 shall be suspended till 31.03.2018 and will be
reviewed by a committee of experts. This will benefit small businesses and substantially reduce compliance costs.”

As per the press release, you will note that the reverse charge payable under section 9(4) of the CGST Act, 2017 [corresponding to Section 5(4) of the IGST Act, 2017] is sought to be postponed up to March 2018. The said section 9(4) pertains to purchases by a registered person from an unregistered person.

In case of a Mutual fund distributor who is already registered because he has an annual turnover exceeding Rs.20 Lakhs, there is no relief because he is already registered.

The meaning I gather is that –
1. In cases where the MF distributor is NOT registered under GST because his turnover is less than 20 Lakhs,
2. As a result, the AMC has to pay GST on reverse charge because the MF distributor is not registered,
3. Hence, the MF distributor gets a lower amount of commission from the AMF (as the AMC generally deducts the GST amount from the distributors commission),

Such people will get relief. However, MF distributors having more than 20 Lakhs turnover, will have to continue with their registration and pay 18% GST on the distribution commission.

Moreover, the provision is only postponed up to March 2018. If Section 9(4) is made effective after March 2018, there will be no change in the current position.
3A FINCON · 2 days ago
AMC, S should refund GST deducted from Unregistered IFA, s under RCM for last 3 Months. How could they take Input Tax Credit at the cost of small Distributors ? AMC, s were making undue profits by deducting GST and claiming ITC. They should Refund now... from their own pockets instead of looking at Govt. to Refund. AMC,s should change their attitude towards small Distributors. Don't forget... today's small will be big tomorrow.
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Chandrasekhar kabra · 1 week ago
I am surprised. to see this new change from Government on GST. Whether Reverse charge or direct charge if Government is now not going to charge GST on reverse charge till 2018 up to 20 lakhs - our sincere request to Government to explain on what parameters ,those distributors earning more than 20 lakhs( it's not fixed salary- it's commission earned depending on one's s performance which is never static) how can be one sure at the beginning of Financial year that income will exceed 20 lakhs.So he may not opt for GST but in later months his income surge and he then is liable , whether he will be penalized). Secondly in selling all other Financial products like Insurance/stocks/NPS/ Real estate/ commodity it's the investor who is paying GST directly- why in MF just like insurance Ulip- investor is not charged directly by AMC- why is this reverse mechanism only in MF- There is no GST if MF units are sold directly ( this is also within the perview of service and here AMC is providing services in form account statement). PL enlighten on this big dichotomy in relation to MF and penalization of distributors.
Rahul, Amffa · 1 week ago
In case of IGST, things are still not clear. Let us ask clarification together from GST council thru tweet, mail etc. Govt. Like to mum in special classes, we ourselves have judgement. Why Gst council does not state clear cut guidelines for us. Anyway we are 20 lakhs cr. Industry.
Abhishek · 1 week ago
An important question I have is that when we have already registered our GST number with the MF.. what exactly will be the steps now. Will GST still be deducted now on our commission or not?? And as it is a new registration not migrating from service tax, so cancelling of GST is not available for me as of now.
Moxnme33 · 1 week ago
Even if those who had taken voluntary registration wanted to cancel thier GST no cancellation takes one year. In the meantime after March 2018 registration may be required again. So this makes no sense at all.
Karan · 1 week ago
People working with ND's will be at great loss. Bcoz they will be deducting GST. Many says they don't deduct GST, but they have reduced their brokerage. So one and the same.. It wiuld be better to be directly working with AMC.
Swati sharma · 1 week ago
Please correct me if I am wrong..
I have turnover much lesser than 20 lacs and I took gst registration because of government complies. So now I need not to give invoices to AMC and pay GST. As service provider with turnover less than 20 lacs doesn't require to take Gst registration even if they are making inter state sales. So should we file nil return file or surrender our Gst registration.
usha arora · 1 week ago
Kindly refer to paragraph 6 of the government press release, reproduced hereunder -

“6. The reverse charge mechanism under sub-section (4) of section 9 of the CGST Act, 2017 and under sub-section (4) of section 5 of the IGST Act, 2017 shall be suspended till 31.03.2018 and will be
reviewed by a committee of experts. This will benefit small businesses and substantially reduce compliance costs.”

As per the press release, you will note that the reverse charge payable under section 9(4) of the CGST Act, 2017 [corresponding to Section 5(4) of the IGST Act, 2017] is sought to be postponed up to March 2018. The said section 9(4) pertains to purchases by a registered person from an unregistered person.

In case of a Mutual fund distributor who is already registered because he has an annual turnover exceeding Rs.20 Lakhs, there is no relief because he is already registered.

The meaning I gather is that –
1. In cases where the MF distributor is NOT registered under GST because his turnover is less than 20 Lakhs,
2. As a result, the AMC has to pay GST on reverse charge because the MF distributor is not registered,
3. Hence, the MF distributor gets a lower amount of commission from the AMF (as the AMC generally deducts the GST amount from the distributors commission),

Such people will get relief. However, MF distributors having more than 20 Lakhs turnover, will have to continue with their registration and pay 18% GST on the distribution commission.

Moreover, the provision is only postponed up to March 2018. If Section 9(4) is made effective after March 2018, there will be no change in the current position.
Reply
HEENA MEHROTRA · 1 week ago
My Question is- I have a GST registration number from July 2017 and also has submitted in cams and karvy both. And receving the gross brokerage from Amc. And my annual brokerage is less than 20 lakh. Now as per New process due to less than 20lakh brokerage we are exempt for pay GST or not with the having gst number in Uttar Pradesh.
Satish M Charanpahari · 1 week ago
As per GST there is no any exemption limit for IGST under which most of IFA fall than what does RCM means and how benefit of RCM can be availed. AMC using RCM , do not understand under which criteria they are using this or what is actual rule.
Swati · 1 week ago
I also have same confusion. I think we have to file nil return or surrender our GST registration
moxnme33 · 1 week ago
U cannot surrender your GST registration till one year has passed since your registration date and by then (April 2018 ) you dont know what the new laws will be.
KABERI MITRA · 1 week ago
Nothing is clear regarding GST. We are depending on the circular only. Implementing authorities are confused themselves. It will discourage the small distributor.
Reply
Swati sharma · 1 week ago
As per IGST rule, a service provider have to take GST no if he make inter state sales, even if his turnover is less than 20 lacs. But if he doesn't take GST registration he will be considered as unregistered dealer and in that case reverse charge mechanism will aply means the registered service receiver will deduct the GST from payment of unregistered service provider and pay to govt on his behalf. As All AMC are mumbai based so IFA outside mumbai need to registered and Pay Gst to government out of their brokerage. And if they don't get registered AMC will deduct GST from their brokerage and pay to Govt under reverse charge mechanism.
Now both complies reverse charge mechanism and Gst registration on inter state sales with less than 20 lacs turnover have been exempted. So IFA with Turnover less than 20 lacs turnover are exempted to pay GST whether they have GST registration or not.
My question is that how IFA with GST registration and turnover less than 20 lacs manage to pay no GST to govt. Should they surrender their registration or file nil GST return.
rajendra prasad verma · 1 week ago
I have also taken gst no and amount of tax invoices are deposited on igst site. But return of August 2017 is not filled because gst file return site is not responding. What happens about return in this scenario
Swati sharma · 1 week ago
One more question..We can't surrender GST registration till one year in case of voluntary registration but we did not apply for GST on voluntary basis.it was govt compliance.
usha arora · 1 week ago
Cancellation of registration under GST- Why & How?
Goods and service tax or GST will be one tax to subsume all taxes. It will bring in “One nation one tax” regime. All taxable persons (threshold: turnover over Rs.20 lakhs) will have to get registered under GST. Such taxable persons may cancel their own registration or have their registration cancelled by the authorities due to violations.


Who can cancel GST registration?
Cancellation of GST registration can be done by-

a proper officer OR
requested by the concerned person himself *** OR
on an application filed by his legal heirs, in case of death of such person
***However, application for cancellation of registration by the concerned person who has registered voluntarily will be only after one year from the date of registration.
When can GST get cancelled?
The business has been discontinued,
The business has been transferred fully, amalgamated, demerged or otherwise disposed —The transferee (or the new company from amalgamation/ demerger) has to get registered
There is any change in the constitution of the business (For example- Private limited company has changed to a public limited company)



"The taxable person is no longer liable to be registered (For example- later laws may increase threshold of registration which is above the tax payer’s turnover)"


The registered taxable person has contravened provisions of GST
A person paying tax under composition levy has not furnished returns for three consecutive quarters
Any taxable person who has not furnished returns for a continuous period of six months
Any person who has taken voluntary registration and has not commenced business within six months from the date of registration. [For more on voluntary registration please read our article]
Any registration has been obtained by fraud the proper officer may cancel the registration with retrospective effect.
In my opinion above mentioned in inverted commas will be applicable where turnover is less than 20 lakhs and the registration has been made recently voluntarily.However we should wait for further more clarification.
Reply
Swati sharma · 1 week ago
One more question..We can't surrender GST registration till one year in case of voluntary registration but we did not apply for GST on voluntary basis.it was govt compliance.
yfs · 1 week ago
in gst ACT it is nowhere written about 1 year period before you apply for cancellation of new gst taken voluntarily , i inquired about it to authorities , they told, gst registration cancellation window will be available by 15 oct 2017 , after that those ifa with less than 20 lakh income can surrender , simultaneously ifas should demand de-rgistration of gstn by amfi /amcs if your income is less than threshold ,it will be inappropriate to those gst registered ifa less than threshold and are asked to pay tax
yfs · 1 week ago
one can contact gst help desk forr queries
and pursue de-registration of gstn from brokerage at amfi amc level
Reply
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