In the current budget the FM has proposed it as an amendment under service tax.
In the budget 2012-13, it is proposed that ‘a mutual fund agent or distributor to mutual fund or asset management company (to) be exempted from paying service tax who are responsible for distribution or marketing of mutual fund’.
Once implemented, it will make life of agents easy because currently they receive a trail commission after deduction of 10.3 percent service tax. “It is a good sign for all distributors, especially small ones. They will no more have to pay 10.3 percent as service tax after the proposal comes into effect,” said Ramesh Bhat, President of IFA Galaxy.
“It is still a proposal but we are hoping to see it turning into an amendment soon. This will at least help us save some money. In India, the investor does not pay us a service tax for availing our advisory service but we (advisors) were supposed to pay the tax for advising. I feel it will be a fair game now,” said Mukesh Dedhia, Partner Ghalla Bhansali Securities.
Advisors are eagerly awaiting more details on how it is going to be worked out. “It is a positive move but we need to see how it will be executed because someone has to bear the service tax. We have asked for more clarity from AMCs side,” said Rajesh Jha, CEO Jain Investment.
Also read: Service tax exemption is still a while away for MF distributors
