In its board meeting held today in Mumbai, AMFI has decided to pass the service tax burden on distributors, said two people familiar with the development. Both these officials were part of the AMFI meeting.
SEBI is said to have refused AMFI’s proposal to absorb service tax in TER.
Cafemutual tried to call H N Sinor, CEO, AMFI. He was not available for comments.
However, SEBI has assured that they will approach the Ministry of Finance seeking relaxation from service tax for distributors earning less than Rs.10 lakh a year, said officials who attended AMFI meeting. Earlier, AMFI had sent a letter to the Ministry of Finance and SEBI seeking relaxation on service tax for such distributors. On the proposal, Sinor had said, “Just like form 15 G in which investors who don’t fall under income tax net can claim waiver from TDS from the interest earned on investments, we will request a similar procedure for distributors who earn less than Rs.10 lakh annually.” If the proposal goes through, it will benefit a large number of distributors.” According to rough industry estimates, only around 1,200 distributors earn more than 10 lakh per annum.
Income tax norms stipulate that a service provider having an annual income of less than Rs.10 lakh need not pay service tax. However, this does not apply to mutual fund distributors. The ministry has put mutual fund distributors under reverse charge mechanism in which service recipient (AMCs) pay tax on behalf of distributors. Typically, fund houses deduct this tax from the commissions they pay to distributors.
