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One of our readers wrote to us with this query:
Dear Cafemutual,
I am an MFD. I have couple of queries related to GST.
I had a GST registration number. But I cancelled it after the government exempted MFDs from paying GST on commission income of Rs.20 lakh. This year, I have crossed the threshold and received a communication from AMFI to obtain GST registration number.
My question is if an MFD crosses threshold limit of Rs.20 lakh and obtains GST, does he need to pay GST on entire amount i.e. from Re.1?
If an MFD took GST in FY 2016-17 and surrendered it subsequently in FY 2019-20, what will happen to him if he takes GST again in FY 2022-23? How soon I need to obtain GST?
I have split my business across multiple ARNs to keep my overall income below the threshold. Now, I am confident that it will not cross threshold in the subsequent years. Can I cancel it again in the subsequent year after reobtaining it?
The sender requested anonymity
Dear MFD,
You will be required to obtain GST registration number within 30 days of reaching the threshold limit of Rs.20 lakh income. Here income is commission earned from all financial products like mutual funds, insurance, p2p lending and so on.
While you need to consider insurance commission to arrive at income threshold, you need not pay GST on insurance commission as it is subject to reverse charge mechanism.
Now coming back to your query, if you obtain GST registration post reaching the threshold limit of Rs.20 lakh, you will have to pay GST only on the incremental income in the first year.
Since you surrendered your GST registration before and are now reobtaining it, your re-registration will be considered fresh and you will have to pay GST only on the incremental income in the first year.
For instance, if your gross income is Rs.24 lakh from MF commission, you will have to pay GST only on Rs.4 lakh. From next year onwards, GST will be applicable from Re.1 and it will be irrespective of your income i.e. even if you earn less than Rs.20 lakh and have GST registration number, you will have to pay on your commission income.
On cancellation of GST registration, you can cancel your GST registration only if your income doesn’t exceed the threshold limit in the subsequent financial year. Overall, you can obtain and cancel GST registration multiple times.
Here is example with assumption:
|
Financial year |
Income from MF commission |
GST applicability |
|
FY 2022-23 |
Rs.21 lakh |
GST has to be paid on incremental income or Rs.1 lakh in this case |
|
FY 2023-24 |
Rs.18 lakh |
GST has to be paid on the entire Rs.18 lakh |
|
FY 2024-25 |
NA |
Can be nil. You can cancel it on the basis of the previous year income |
Either you obtain or cancel GST, remember that you are required to update AMFI about your GST status. You should send an email to amfigst@camsonline.com with details of the GST number along with documents like a scanned copy of GST acknowledgement receipt.
Please note that Cafemutual has spoken to GST experts at consulting firms, compliance officials at AMCs and chartered accountants to write 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.
