AMFI along with consulting firm PwC have made a representation to GST Commissioner Upendra Gupta requesting to keep service tax rate at 12% in mutual funds.
CVR Rajendran, CEO, AMFI told Cafemutual that AMFI has requested the government to keep service tax levy under mutual funds in line with the other financial products. He said, Government is likely to put insurance under 12% rate in GST. We want a level playing field and hence we requested them to consider putting mutual funds under the same rate.
Earlier this month, the government has finalized Goods and Services Tax (GST) tax structure in which it has kept standard rates at 12% and 18%. Though the government has not clarified the tax structure of mutual fund distributors yet, some tax experts whom Cafemutual spoke to are of the view that financial services industry may fall under the 18% tax rate.
Further, AMFI has requested the government to exclude ‘securities’ from the definition of services. Currently, there is no service tax on securities as it doesnt come under consumable goods. However, if the Bill is implemented in its current structure, every time a fund manager executes a trade, the fund will have to pay service tax just like STT. Simply put, it will raise costs substantially and dampen the demand for this product.
Another request that AMFI has made to the GST Commissioner is to provide centralized registration. In its current form, the GST Bill says that the service tax has to be paid at a place where it has been consumed. The compliance official of a large fund house had earlier told Cafemutual that both AMCs and distributors will have to register themselves with the service tax department of the respective states since they have investors spread across the country. This tax can be paid online but auditing and compliance needs to be done at the source state, he had told Cafemutual.
Tax experts whom we spoke to say that many countries which follow GST regime give a preferential treatment to financial services. Under such a treatment, the government relaxes the compliance requirements and keeps special GST rate for the financial services industry.
