Not registering with GST to lead to a cut in commission of AMC distributors

The distributors are likely to witness a cut in their commission as the Asset Management Companies (AMC) are planning to deduct GST from the commission income of the distributors who do not have GST registration number. The AMCs will further pass on the deductions to the government from July 1.

According to market reports, the decision to deduct GST is being considered by the Association of Mutual Funds in India (AMFI) on the recommendation of the global audit major PricewaterhouseCoopers (PwC).

The association body of mutual funds across India, AMFI, had earlier commissioned PwC to prepare a report on the implementation of GST as well as its impact on the growing mutual fund industry of India.    

The GST Council has imposed a standard 18 per cent tax on all financial services including mutual funds, resulting in a 3 per cent addition in the tax liability of distributors. The distributors earning less than Rs 20 lakh will be exempt from taxes, although, they will have to register themselves under GST to avail the benefit.    
      
Furthermore, if distributors sell schemes of a fund based outside their home state, they will have to take a GST registration number. While, the distributors selling schemes of the same-state fund house will not be required to take a GST registration but will be liable to pay GST of Rs 1.

Hence, requiring all the distributors to take GST registration to get gross commission irrespective of their earnings, and thus, save some amount via input credit.