AMFI has sent a letter to the Ministry of Finance and SEBI seeking relaxation on service tax for distributors earning less than Rs.10 lakh per annum as commission, confirmed H N Sinor, CEO, AMFI.
The CEO of an emerging fund house is of the view that the burden of service tax will discourage small distributors to sell mutual funds. “Though service tax will affect the entire distribution community, large players like banks and national distributors have other sources of income. Service tax will have the most severe impact on the small IFAs. Hence, AMFI has sent its representation to SEBI and the Ministry of Finance seeking exemption for the small distributor who are earning less than Rs.10 lakh.”
Income tax norms stipulate that a service provider having an annual income of less than Rs.10 lakh need not pay service tax. However, mutual fund distributors have been kept away from this relaxation. Also, distributors cannot set off the service tax paid on commission with other services if the service tax is deducted at source by AMCs, said a Mumbai based distributor.
According to industry estimates, only around 1,200 distributors earn more than 10 lakh per annum. If the Finance Ministry accepts AMFI’s request it will benefit a large number of distributors.
It remains to be seen whether the Ministry of Finance provides some relief to distributors.
Cafemutual had first reported that AMFI is planning to approach SEBI and Finance Ministry to seek relaxation on service tax. Read here.
