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One of our readers wrote to us with this query:
I am a Rajkot based individual MFD. My commission income is over Rs.20 lakh across all financial products but it does not exceed Rs.50 lakh. I understand through your articles that only Maharashtra MFD can avail benefits of lower GST rates under composition scheme. My question is can I obtain GST in Maharashtra to avail this benefit? If yes, what’s the procedure?
The sender requested anonymity
Dear MFD,
Yes, only distributors who earn up to Rs.50 lakh and do not have any business with AMCs outside Maharashtra are eligible to pay lower GST rates under Composition Scheme.
The scheme allows service providers (eligible MFDs in this case) earning up to Rs.50 lakh to pay GST rate of 6% instead of 18%. However, these eligible MFDs cannot avail of input credits if they opt for Composition Scheme. Also, they will have to pay taxes quarterly but file returns annually.
On obtaining GST from Maharashtra, tax experts say that you can obtain fresh GST number from Maharashtra provided you have registered address proof in Maharashtra. You may look at renting out an office in Maharashtra to obtain fresh GST registration. Experts also say that the existing GST registration (Gujarat in this case) has to be surrendered before applying for the new one.
However, experts believe that MFDs first need to figure out the net savings before making any decision. “We have seen instances where service providers pay net GST of 5% after factoring in input credits, which is still lesser than 6% in composition scheme.”
Once you obtain new GST, you can opt for the composition scheme on GST portal by using login ID, password and captcha code. After login, you will be directed to a dashboard. Click on ‘service’ and select the category ‘amendment of registration core fields’ from the drop-down menu before opting for composition scheme. You can check your information and modify if necessary. Make sure the information in the portal holds true as on the date of opting for composition scheme.
Now search for the section ‘nature of business being carried out’ and select ‘others (9971)’ and specify that you are a supplier of financial services. After filling and verifying all information, you can select ‘Application to opt for composition levy’ and give your declaration. You can sign it digitally or through electronic verification code (EVC).
Remember that you cannot select past date to avail benefits under this scheme. You can select either the date of declaration or future date.
Once you get confirmation, you will have to update your status on GST Composition Scheme by sending an email to amfigst@camsonline.com with details of the GST number. You will also have to attach scanned copies of the confirmation receipt that you have opted for GST Composition Scheme.
Since AMFI will update all AMCs and RTAs about your Composition Scheme status, there is no need to inform AMCs and R&T agents separately.
In addition, MF distributors are required to raise a new invoice called ‘bill of supply’ to avail of the benefit of lower GST rates under Composition Scheme.
Please note that Cafemutual has spoken to GST experts at consulting firms, compliance officials at AMCs and chartered accountants to confirm this report. We intend to clarify your doubts on GST. This does not tantamount to be a tax advice of any nature or a recommendation. Please take advice from a qualified tax advisor for your guidance
