In an FAQ released yesterday, AMFI said that AMCs will 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.
Cafemutual had reported on July 21 that AMCs are likely to deduct GST from the commission of distributors who do have GST registration number on the recommendation of PwC.
Answering the question, ‘Does a distributor have to pay tax when the turnover is less than Rs20 lakh and if such a distributor is unregistered’, AMFI said, “No, the AMC/MF will pay tax under reverse change with respect to payments to unregistered distributors.”
This means, fund houses will follow reverse charge mechanism to implement GST for distributors earning less than Rs20 lakh. These distributors cannot claim refund of the amount deducted under reverse charge mechanism.
For distributors with GST registration, AMCs will continue to follow forward charge mechanism, i.e., AMCs will pay the gross commission to them. However, such distributors will have to raise an invoice for the brokerage in a specified format.
AMFI has 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, the exemption limit for distributors from special states is Rs10 lakh a year. Special category states comprise Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand. Since most AMCs are based out of Maharashtra, Gujarat and Tamil Nadu, distributors based out of special category states will have to obtain GST registration.
Most of the fund officials to whom Cafemutual spoke to recommended distributors to obtain GST registration irrespective of their annual income. A senior official from a large fund house said, “Anyway, AMCs will deduct GST from commission from July 1 under reverse charge mechanism which cannot be refunded. It is better to obtain GST registration and pay GST directly to the government. Though it will attract some compliance cost and documentation, distributors can save at least some amount through input credit.”
However, AMFI FAQ said that distributors could not avail input credit on inputs used for non-business activities, inputs used from providing exempt supplies and so on.
Another senior official said that input credit would be beneficial for distributors with an organised set-up. “Distributors having an organised business set-up, with an office, a team and systems and processes, can get the benefits of input credit.”
For distributors who already obtained GST registration and want to get gross commission:
- They can send an email for their registered email id to amfigst@camsonline.com with details of the GST number. They will also have to attach scanned copies of GST registration certificates.
- They can also visit their nearest CAMS Service Centre along with the mentioned documents.
- They can register themselves on their own through AMFI’s website. Distributors will have to key in their ARN code and PAN details. An OTP will generate to the registered mobile number and email address. The distributor will be required to input the OTP in the relevant box and update state-wise GSTN numbers and upload the registration certificate images. This facility will be enabled on AMFI's website from 30 June, 2017.
