AMFI is likely to take up the service tax issue with SEBI Chairman UK Sinha soon. The decision was taken at a board meeting held on Friday in Mumbai, confirmed two CEOs.
An SMS sent to H N Sinor, CEO, AMFI did not elicit a response.
Sources said that AMFI has decided to request SEBI to consider passing on service tax burden to investors. Currently, investors pay service tax on management fee only. If AMFI’s proposal goes through, MF investors will have to pay service tax on overall total expense ratio (TER) which includes expenses incurred on distribution. As a result, the TER may go up to some extent.
The CEO of a private sector fund house said that if service tax is passed on to investors the impact will only be marginal. “This will not pinch investors. The overall TER may go up by a few basis points. A rough calculation indicates that investors will have to bear an additional expense of 8 basis points.”
Another CEO of a large fund house stressed the need to resolve service tax issue. “Service tax is a long term issue for the mutual fund industry. With the implementation of GST, it may even go up to 20%. Small IFAs will be severely affected by this.”
Last month, SEBI Chairman U K Sinha ruled out the possibility of any assistance from the market regulator on service tax issue on the sidelines of an event. Sinha clarified that the market regulator will not discuss service tax issue with the Ministry of Finance.
It remains to be seen if SEBI chief will reconsider his stance.
