Goods and Services Tax (GST) will be rolled out by July 1, 2017 as all the states have agreed to it, said the Economic Affairs Secretary Shaktikanta Das. He was speaking to the media at a press conference held in New Delhi.
"GST implementation is a huge one and that is going to be implemented by July 1. Both central and state governments are working on this," Das quoted this in the Economic Times newspaper.
The GST Bill is expected to have a huge impact on all stakeholders of the personal finance industry – mutual funds, insurance, distributors and investors.
A key question that the bill raises is regarding the requirement of state specific registration and compliance. The current Bill says that the service tax has to be paid at a place where it has been consumed. AMCs, insurers and distributors have investors spread across the country. That means both companies and distributors will have to register themselves with the service tax department of the respective states. This tax can be paid online but auditing and compliance need to be done at the source state.
On commission, the service tax liability of IFAs may go up. Based on current speculation, the service tax burden of distributors earning over Rs.20 lakh a year may go up to 18%.
For investors, the mutual fund scheme may get costlier since fund houses charge service tax on management fee. Suppose the total expense ratio (TER) is 2.50% and the scheme is charging 1% management fee, service tax is levied on management 1% fee. Fund officials say that the TER might go up by 3 to 4 basis points due to the new standard rate.
Another key concern for the industry was inclusion of securities in the definition of goods. However, the GST council has recently proposed to exempt securities from the ambit of GST in the revised draft of the Modal GST.
It remains to be seen how the government and the industry deal with these issues.