In its Budget wish list sent to the Ministry of Finance, AMFI has sought relaxation on service tax for distributors earning less than Rs. 10 lakh commission annually, confirmed C.V.R. Rajendran, CEO, AMFI.
“We have sent a letter to the Ministry of Finance seeking relaxation for distributors earning less than Rs.10 lakh commission annually. We have apprised the Ministry about the detrimental effect the service tax will have on the growth of the mutual fund industry,” said Rajendran.
The CEO of a private sector fund house says, “Though service tax affects the entire distribution community, large players like banks and national distributors have other sources of income. It is the smaller IFAs who will be impacted more. Hence, AMFI has sent its representation to SEBI and the Ministry of Finance seeking exemption for distributors 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 annually. If the Finance Ministry accepts AMFI’s request it will benefit a large number of distributors.
It remains to be seen if the Ministry of Finance provides some relief to distributors in the upcoming Budget.
