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Over the last couple of days, we have received several queries on GST related issues.
According to MFDs, while many of them who had crossed the threshold limit of Rs.20 lakh received email from AMFI to obtain GST registration immediately, some received summons from the GST authority for non-payment of GST even when they had not crossed the threshold limit.
In this article, we answer a few queries on how you can comply with the GST norms.
Whether MFDs can be exempted from paying GST if their total commission doesn’t exceed Rs.20 lakh.
As per AMFI FAQ published in October 2017, distributors who earn commission income of less than Rs.20 lakh and do not have GST registration number are exempted from paying GST.
Such a limit is Rs.10 lakh in special states like Sikkim, Jammu & Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand.
Tax experts say that MFDs will have to be mindful for calculating this threshold limit. According to them, the threshold includes commission income from other line of business across financial products like NPS, life insurance, motor insurance, health insurance, P2P lending, PMS and AIF.
Also, the calculation has to be considered irrespective of the fact that you have paid GST on other income or not. For instance, if you receive a gross commission of Rs.15 lakh (with GST component) from mutual funds and net commission of Rs.6 lakh (after deduction of GST) from insurance, you still have to pay GST on your total income.
What if I have taken the GST registration number voluntarily?
Anyone can take the GST registration number voluntarily. In this case, the threshold limit of exemption will not be applicable. You need to pay GST from Re.1.
What if I have not taken the GST registration number due to lack of awareness?
While you are required to obtain a GST registration number within 30 days of crossing the threshold limit, you will have to pay GST in this case.
However, you may request the GST officer not to impose penalty on the unpaid tax under the section 73 of the GST act.
The Section 73 is determination of tax not paid or short paid or erroneously refunded or input credit wrongly availed or utilized for any reason other than fraud or any wilful mis-statement or suppression of facts.
However, the final discretion to give such a relaxation stays with the officer.
What if I have taken GST registration and have not paid GST?
This is clearly non-compliance. In this case, the GST commissioner will impose fine on you under section 74 of the GST act, which means you wilfully defaulted on GST payment.
How do I know about my GST liability?
RTAs offer a mail back report having break up of commission which indicates how much is the net commission and the GST component.
Syed Hasan, Chief Operating Officer, CAMS said that his company has recently started offering an automated report for MFDs that can help them view the actual distributor commissions and associated GST across all CAMS serviced AMCs for any input month/year criteria.
Syed said, “Distributors have found this really useful especially to pull out the commission and GST data at a click of a button for all AMCs and this report provides the data for the last three years. It is available on camsonline.com once the distributors login with their email id in the Invoice Download option under Services for Distributors/RIA section”
How do I respond to a summon notice?
The GST officer has the power to summon anyone. You will have to visit the officer and put forth your reasons for not paying GST or not registering for GST.
What if the tax authority does not listen to my request?
The chances of this happening are very acute. MFDs should calmly sit with the officials and explain to them about the business of distribution of financial products in detail.
Mumbai CA Sandeep Gupta of Gupta SM and Co. Chartered Accountant is of the view that distributors should first respond to summon with all the supporting documents. For instance, if the tax authority insists on a reason for not paying GST when the income was less than Rs.20 lakh, they may submit AMFI’s FAQ. If the officer still does not listen to your request, you may wait for the officer to issue an order. Once you receive such an order, you may raise a complaint through the GST portal about the issue, said Sandeep.
Delhi’s Ikesh Nagpal, Head, Indirect Taxation, AKM Global said, “The recent scrutiny of mutual fund distributors under GST underscores the complex challenges that small taxpayers encounter, particularly in grasping the nuances of supply valuation and registration requirements. It is imperative for these small enterprises to be diligent in their GST compliance, as even inadvertent missteps can have significant financial repercussions, potentially impacting their earnings. This situation highlights a broader concern that GST provisions can be challenging for smaller businesses, if not thoroughly comprehended. It is essential for the government to consider simplifying these rules to create a more supportive and business-friendly environment.”
Disclaimer: Please note that Cafemutual has spoken to GST experts at consulting firms, compliance officials at AMCs and chartered accountants to write this article. 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
