AMFI has requested the government to keep service tax rate at 12% in mutual funds, which is in line with the other financial products. In fact, AMFI handed over a letter to the finance ministry during a meeting held two week ago, said two senior association officials aware of the development.
One of the senior officials said that the government is likely to put insurance under 12% rate in GST. “The mutual fund industry wants a level playing field, hence we requested them to consider putting mutual funds under the same rate,” he added.
Earlier in November 2016, the government finalised the Goods and Services Tax (GST) tax structure in which it kept standard rates at 12% and 18%. Though the government has not clarified the tax structure of mutual fund distributors yet, some tax experts whom Cafemutual spoke to are of the view that financial services industry may fall under the 18% tax rate.
Another request that AMFI has made to the government is to provide centralised registration. In its current form, the GST Bill says that service tax has to be paid where the service has been availed of. The compliance official of a large fund house had earlier told Cafemutual that both AMCs and distributors will have to register themselves with the service tax department of respective states since they have investors spread across the country. This tax can be paid online, but auditing and compliance need to be done in the source state, he added.
Tax experts we spoke to say that many countries, which follow the GST regime, give preferential treatment to financial services. The government relaxes the compliance requirements and keeps special GST rate for the financial services industry.