The Budget 2016 has proposed to exempt service tax on regulatory services of SEBI and IRDAI from April 1, 2016. This move would benefit fund houses, registered investment advisers, insurance companies and insurance intermediaries who pay service tax for availing regulatory services.
“Service tax on the regulatory services provided by SEBI and IRDAI being exempted with effect from April 1, 2016,” says the budget document.
SEBI charges two types of fees from fund houses – annual fee of 0.0015% on AAUM of up to Rs. 10,000 crore and 0.0010% for AAUM above Rs. 10,000 crore and a flat fee of Rs.2 lakh on every draft offer document for launching a new fund. Overall, the annual fee ranges between Rs.2.5 lakh and Rs.1 crore. For instance, a fund house with AAUM of Rs. 25,000 crore has to cough up Rs. 30 lakh. Similarly, large fund houses like HDFC, ICICI Prudential, Reliance, Birla Sun Life, UTI pay the maximum limit of Rs. 1 crore as fees to SEBI.
SEBI charges a registration fee of Rs.10,000 and Rs. 5 lakh from individuals and corporates for granting Registered Investment Advisors (RIAs) license respectively. RIAs have to pay a renewal fee every five years to renew their licenses. In addition, individual and corporate have to pay a one-time flat fee Rs. 5,000 and Rs.25,000 as application fee.
Similarly, IRDAI charges an annual renewal fee of 1/20th of 1% of gross direct premium written which ranges between Rs.50,000 and Rs.5 crore from insurance companies.
The fee charged from insurance intermediaries depends on the type of intermediaries and their commission structure. Direct brokers have to cough up a flat fee of Rs. 1,000 as renewal fee and annual fee of 0.5% of total remuneration earned in a financial year subject to a minimum of Rs. 25,000 and maximum of Rs.1 lakh. Likewise, apart from Rs.1,000 as renewal fee, composite brokers have to pay 0.5% of commission earned which ranges between Rs.1.25 lakh and Rs.5 lakh as a renewal fee.
Other intermediaries like insurance marketing firms and corporate agents cough a renewal fee of Rs.2,000 and Rs.250 respectively. Agents have been exempted from paying fees as IRDAI has recently ended licensing system of agents and allowed insurance companies to appoint insurance agents directly.
The move to exempt service tax for availing regulatory services would help all stakeholders.
