New Delhi: The Association of Mutual Funds in India (AMFI) has sought safeguards under the new Goods and Services Tax or GST regime as it believes that mutual fund units could become more expensive due to increase in cost or compliance.
Mutual fund industry body Amfi, along with PwC, made a representation to GST Commissioner Upendra Gupta last month and requested that securities should be excluded from the definition of goods or otherwise exempted from levy of GST. Under the present VAT and service tax laws, transactions in securities are not taxed. If supply of securities is liable to new GST tax, the very existence of the MF sector would be jeopardised, it felt.
The industry body has requested that GST Model law should provide for centralised registration and reflect details of all the places of business. The current provisions of the law would impose an enormous burden of compliance on an assessee as he is required to register and file returns from more than one place of business.
The GST commissioner is believed to have said the entire service industry is generally very late in representing to the government on their viewpoint and that due to paucity of time, many genuine aspects may not see the light of day. He, however, agreed that single return compliance or centralised registration should be the order of the day for the financial services sector, and the central government has agreed to it.
Sources said the industry needs to approach state governments to sort it out. They also stressed that if the industry comes up with a solution which is a win-win for all, the proposal can be looked at. As per the the model law, GST is to be paid at the place where a service is deemed to be supplied. Besides, the head office and the branch of the asset management company will be treated as separate persons.
The asset management activity is normally undertaken by the AMC from its head office where the fund managers are located while the marketing of the schemes takes place all over the country through the head office and the branches. Amfi believes that such provisions will impose an enormous burden of compliance on the fund houses.
According to the industry body, transactions between branches and headquarter of the AMC should not be treated as supply and credits accumulated at branches of the AMCs should be available to the MF sector. It requested that the fund and its AMC should not be treated as ‘related persons’ under the GST regime.
The mutual funds sector, which plays an important role in the development of the financial system, should be liable to lower rate of GST.
“It is prayed that rate of tax be made applicable to the MFs so as to ensure the investors/unit holders are not deterred from investing in the MF sector due to high rate of GST and in favour of other avenues of investments where returns are not expected to be liable to GST,” Amfi noted.