AMFI has clarified that service tax will have to be borne by distributors.
AMFI has sent a clarification to fund houses today that the service tax exemption removed by Union Budget 2015 has to be ultimately borne by distributors.
“In 2012, the Budget had put MF distributor’s service in the negative list of tax exemption. Now it has removed it. So distributors will have to bear the service tax,” H N Sinor, Chief Executive Officer, AMFI told Cafemutual.
A number of IFA Associations had represented to AMFI and SEBI to see if service tax can be passed on to investors. IFAs were contesting that since AMCs are allowed to charge service tax on schemes over and above TER, the service tax on distributors should also be charged to scheme.
With the cap on commissions and the service tax hit, distributors are disappointed. “It will hit small IFAs very hard. IFAs who have sizeable AUMs will also be hit as it will reduce their earnings,” said a Mumbai based distributor.
