Yesterday, the ministry of finance has tweeted about developments in goods and services (GST) tax to commemorate the first death anniversary of the former finance minister Arun Jaitley who introduced the GST tax regime in India.
However, the series of tweets has created confusion among a section of MF distribution community about applicability of Rs.40 lakh GST exemption on their business.
MFDs want to understand whether they qualify to claim GST exemption if they earn up to Rs.40 lakh. In addition, if Maharashtra MFDs earning up to Rs.1.50 crore per annum can opt for lower GST rate of 1% under GST composition scheme.
However, both these relaxations are not applicable for individuals who work under service sector, which includes MFDs. Also, there is nothing new in this as these relaxations have been around for a while now.
Currently, the government has exempted distributors irrespective of location earning up to Rs.20 lakh from paying GST offering both intrastate and interstate services. So if you earn commission less than Rs.20 lakh a year, you are exempted from paying GST.
Ensure that you include commission from other financial products to arrive at your annual income. GST norms include commission income from all financial products such as insurance, stock broking and mutual funds to arrive at your annual income.
If you have voluntarily obtained GST registration or migrated from service tax regime to GST, you can cancel your GST registration if your annual income is less than Rs.20 lakh by visiting https://services.gst.gov.in/services/login. Create your account by keying in details such as GST registration number, email id and so on. Once you have logged in with your credentials, you will have to click on ‘cancellation of provisional registration’ appearing on the extreme right hand side. You will have to mention the reason by simply stating that your turnover is less than Rs.20 lakh.
On GST Composition Scheme, currently, only a fraction of Maharashtra distributors who do not have business with AMCs beyond the state and earn between Rs.20 lakh and Rs.50 lakh can avail of the benefits of this scheme.
The Composition Scheme allows MFDs earning up to Rs.50 lakh to pay GST rate of 6% instead of 18%. However, these service providers cannot avail of input credits if they opt for Composition Scheme. Also, they will have to pay taxes quarterly but file returns annually.
