The move comes after distributor associations across India made representation to AMFI to provide some relief to them on service tax.
In its board meeting held today in Mumbai, AMFI has decided to take up the service tax issue with SEBI and the Ministry of Finance.
“We have decided to make a representation to SEBI and the Ministry of Finance. A working group committee appointed by AMFI is working on it,” H N Sinor, CEO, AMFI told Cafemutual.
The move has come after distributor associations across India made representation to AMFI, requesting it to consider passing on the 14% service tax burden on investors through a hike in TER. Distributors are contesting that since AMCs are allowed to charge service tax on management fee over and above TER, the service tax on distributors should also be charged to scheme.
Cafemutual had earlier reported that AMFI is likely to take a call on the service tax issue in its board meeting. Read here.
Ever since Budget 2015 proposed to withdraw the service tax exemption given to mutual fund distributors and brought it under reverse charge mechanism, there is a debate among distributors as to who will be liable to pay this tax –distributor or investor (through a hike in TER).
Distributors were exempted from paying service tax in 2012, which was 10.30% then. The Budget 2015 has withdrawn the service tax exemption given to distributors. Also, the service tax has now been increased from 12% to 14% which has come as a blow to distributors. Earlier, AMCs were paying commissions to distributors after deducting service tax.
It remains to be seen whether the Ministry of Finance provides some relief to distributors.
