Your Voice

GST : Are AMCs really right in their approach

Date : 12-07-2017
Name: Abhijit Parik ARN NO :87541
Firm Name : Mutual Fund Distributor City : AURANGABAD


It’s a matter of Pride for ourNation that major Economic Reform in history of Tax Regime has been passedcalled Goods and Service Tax (GST).

But with such reform, there arevarious sections in the society which are tryingto take undue benefit or trying to create own set of GST law surpassing the Lawin its true sense. Yes, we are discussing regarding the stand taken by someAMC’s (Asset Management Companies) on Mutual Fund Distributors Commission.

1)      Firstly,GST is a tax to be borne by End useri.e Consumer or Service Recipient. Mutual Fund distributors are ServiceProvider to AMC’s ---- which indicates that we are not the End User & theend user is AMC. Thus it is crystal clear that GST is to be borne by AMC’s.

So in anycase AMC cannot deduct GST from Distributors commission. GST is either to bepaid over and above Commission income.

                                        

2)      SomeAMC’s are forcing distributors to take GST registrations while GST Law do notforce Distributors to take Registration. We can refer below illustration tomake it simple. Assumption taken is a case wherein Distributor doesn’t provideInterstate Service.

 

a)     IfPrevious Financial Year’s Commission of Distributor was Below 20 Lakhs

In such case Distributor is not liable to take GSTregistration. In such scenario, Reverse Charge Concept of GST will apply.Reverse Charge says that in this case AMC will pay 18 % GST from their pocketssince they have taken service from Unregistered Service Provider and AMC’s willtake Input Tax Credit for this GST paid from Own  Pocket. Thus it is clear that GST can’t bededucted from Distributors Commission.

 

b)     IfPrevious Financial Year’s Commission of Distributor was Above 20 Lakhs.

In such case Distributor is liable to take GSTregistration. But, since Distributor is Service Provider and AMC is servicerecipient Final GST is to be borne by AMC’s.

Say if the commission payout of distributor for amonth is 5 lakh rupees then the Invoice will be.

Commission  =5,00,000

GST  @ 18 % =90,000

Invoice Amt   =5,90,000

Thus in this case also GST will be borne by AMC’s andnot deducted from Distributors commission. thus total payout of commission should be 5,90,000 Rs including GST

 

If some AMC’s take different stand then it is the FinanceMinistry & GST Committee to interfere as AMC’s can’t Profit at the cost ofDistributors which is against the GST Act.

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Comments Posted
Akhilesh upadhyay ARN NO :ARN 105040 Ranchi, 26 Sep 2017

Sir this is totally unlawful.

RISHABH KUMAR AGRWAL ARN NO :87041 Bareilly, 28 Aug 2017

Yes, GST wrong implementation by AMCs as it is the liability of amc as we are service provider and amc is liable to pay gst amount along with brokerage.

SUNIL LALGE ARN NO :84264 HUBLI, 27 Aug 2017

100% agree with you.AMC should add GST on brokerages and paid to us.

ROHIT SUTHAR ARN NO :75245 PALI, 17 Aug 2017

KYAA HAME GST KE AGAINST AANDOLAN KARNAA CHAAHIYE ?

Anand Chavan ARN NO :101380 Nagpur, 15 Aug 2017

Its wrong practice imposed on IFA by AMCs.We must protect .

AMIT GUPTA ARN NO :118394 Nagpur, 14 Aug 2017

Guys, Its high time to fill case against AMC to reverse its decesion. We have to get together for further action.

Ami Gupt ARN NO :118394 Nagpur, 14 Aug 2017

Dear All, My friend is a Airtel distribution, he got the payout of 10000/- but he received the payout of 11800/- As 1800/- is a 18%GST which he has to fill. If we have to get GST no we will fill this instance of getting 18 % from AMC .AMC is charging 18%GST.

PRADEEP KUMAR DASH ARN NO :39418 DHENKANAL, ODISHA, 24 Jul 2017

You are very right Sir.We the small distributor really don"t understand why we are being forced to pay 18% GST. Both the INSURANCE sectors (LIFE & GENERAL) agents, Postal & Bank agents are not being forced for the same though they are also intermediaries like us.The AUTHORITY / Decision makers should think deeply once again about it as it is directly connected with our bread and butter.It is really undemocratic, unfair, partial,injustice,intensional................................ for us.

MD SAJID HOSSAIN ARN NO :97975 kanpur, 17 Jul 2017

AMCs are exploiting the GST law. Thay are interpreting the law in their own benefit. AMFI is just a puppet body of AMCs only. So AMFI is siding with AMCs. The solution to this is that IFAs must register with GST, but they must be allowed to raise invoice to AMCs adding 18% GST on the payable amount.

Ramchandra Daulat Shinde ARN NO :85933 Mumbai, 17 Jul 2017

It is very true that GST is to be paid by the enduser. In mutual Fund Industry in my opion the ENDUSER is the investor who has to bear the GST on services provided to them. So the GST is to be charge to the scheme and paid by the AMC.

KAMALKISHOR BADRINARAYAN MUNDADA ARN NO :ARN 0621 SHRIRAMPUR, 14 Jul 2017

Very true presentation.Sebi,finance ministry should take necessary move in this issue.

rajesh haldar ARN NO :ARN-103209 NEW DELHI, 13 Jul 2017

i guess mr parik is right. no AMCs are taking it as a serious issue and putting pressure on ifa to go the mile and do the due process at his own.

N K ESWARLAL ARN NO :91916 INDIA, 12 Jul 2017

In my view GST to be borne by AMC. My mutual fund income per ANAM only ranging Rs.100000/- and below one lake , which is lying the limit below 2000000/- So there is no necessity to register in GST As per law. Then why deducting GST from my low income from my mutual fund commission for Rs.100000/- GST is Rs. 18000/- . It has to be considered by Government and SEBI and AMFII. Please reconsider to register GST for Those who are having small income by way of commission earned in mutual funds.

Pinaki Rahman Kundu ARN NO :58176 Kolkata, 12 Jul 2017

Dear all, I think debeting in this forum will not solve the problem. I believe that policy makers know everything what we are discussing here. In the cases of service tax imposition, the same was imposed on IFAs bluntly in the initial stage. Later on it was revised. We are really helpless. We really dont know where to go to get justice. We all are the victim of the blind rule and policy which are made to provide justice but being misused by strong community for their benefit and being supported by policy makers like Dhritarashtra. If you have any sugession please share so that this type of foul game playing can be restricted.

Jose Abraham ARN NO :0566 KOTTAYAM, 12 Jul 2017

ABHIJITJI, you have put it right, clear and straight. AMCs availing the service should pay for it as also bear the service tax on it. Look what is the case in phone charge, the user of service is billed inclusive of the tax to be paid to the govt. So far an undue and unjustifiable burden of service tax was shifted to the hapless / unorganised distributor community and now it is an attempt again to perpetuate it. Let us strive for by joining whatever force we can , that AMCs see the things in right perspective and do the needful correction. Thanks Abhijitji, for your point ofview,

M.Venkateswarararo ARN NO :99702 Hyderabad, 12 Jul 2017

Financial services is under the purview of GST ie Life insurance , Health insurance Mutual funds etc. I have been selling these too where the Service tax is being levied till date to the end user ie the client . How come people with vested interests are conveniently misinterpreting the law when the whole world knows that the this tax is a liability of the end user, which has been a precedent till now. IFAS at large are already being subjected to a great amount of trauma with the new regulations that some vested interests are trying to bring in. I am already feeling intimidated everyday as i have several apprehensions for which i am yet to seek solutions" live and let live " please .

jatin desai ARN NO :1352 ankleshwar, 12 Jul 2017

it islogicaly perfect

Ramakrishnakumar Ramachandran ARN NO :Siddhesh Investments Pune, 12 Jul 2017

Dear Friends, Earlier also, Service tax was made applicable to all and subsequently restricted to income above 10 Lakhs. Now they say its applicable to all irrespective of income level. IN both the scenarios this LEVY is NOT APPLICABLE to US. Lets understand clearly that AMCs are not paying us for the service given but for the business generated by us for them through our clients. So, its commission income on business generated. Hence, if at all any tax is applicale it should be INCOME TAX by way of TDS. SO, they should deduct TDS @10% if income exceeds 20k in a financial year so that we can at-least claim refund or set off. We need to push for this rather than debating who should bear GST .

vipan kumar ARN NO :105820 una, 12 Jul 2017

I agree with your point of view, the matter must be taken with finance ministry if amcs keep on defining gst at their own way...

NARAYANAN P S ARN NO :ARN 26382 MUMBAI, 12 Jul 2017

IN ALL OTHER CASES THE END USER BEARS THE GST, PHONE BILLS, ISSUE OF TICKETS,NEFT TRANSFERS,CHARGES AT BANKS, POLICY ISSUANCE ETC. WHY IN MUTUAL FUNDS, THE IFA OR BROKERS THE FACILITATOR FOR AMCS AND LINK FOR CLIENTS TO BEAR ,NOBODY IS WILLING TO ANSWER AND SOLVE THIS QUESTION. STOCK BROKERS ARE REIMBURSING GST TO BROKERS, HDFC DEPOSITS ARE PAYING GST SEPARATELY TO BROKERS. ONLY MUTUAL FUNDS WANT TO TAKE GST FROM IFA"S. HOPE OUR LEADING ASSOCIATIONS LIKE "FIFA" ASK MFRT, IFA GALAXY WILL DO SOMETHING ABOUT THIS.

ANIL PATIL ARN NO :48878 Nasik, 12 Jul 2017

If distributor registered for GST even if he has income below 20 lakh.In such scenario he has to pay GST on other income also(If he has any other income).Take an example if a distributor having brokekage income of 3 lakh & having rental income of 5 lakh.If he registered for GST then he has to pay GST on the total Income of 8 lakh.

Jitendra Khemani ARN NO :ARN-64487 Indore, 12 Jul 2017

Commissions paid by AMC are inclusive of all taxes. AMC is not liable to pay tax over & above commissions. Kindly refer to your brokerage structure for the same. Secondly, if AMCs are eligible for getting input tax credit after deducting GST, then they must pass such benefit by increasing commissions of the Distributors.

tdevendra ARN NO :sadbhavana hyderabad, 12 Jul 2017

i fully concur with the above. the representative authority is not clear of the understanding. while the AMC /DISTRIBUTORS are scot free of all abn sundry, not even one distributor is making efforts and creating a chaotic situation. i feel that those in above tax brackets may end up paying more 50% of the earning in tax form. while even a professional is not paying more that 30% mandated. the inequality is multifold. this needs serious debate-sadbahavana

Anand Singh Negi ARN NO :53996 New Delhi, 12 Jul 2017

I agree with Mr Parik, GST should be paid by end user. In service tax regime No Service tax till the income is above ?10 Lakh p.a. & No service tax was deducted then if now threshold is ?20 lakh then AMC should not deduct any GST & if its in GST law then All stakeholders should request FM for removing this provision of deduction of GST @18% from Distributor Brokerage upto ? 20 Lakh income p.a. In all Major Services / Product Industry GST is pass on to end user then same should be applicable here.

Salil Gupta ARN NO :S-Cube Mumbai, 12 Jul 2017

The AMCs are making fool out of distributors - they are reducing the commision payout in name of GST and at the same time they will take input credits for the GST that they are paying on rents, electricity, services etc etc - so their profitability will rock at distributor expense Even for below 20 Lakh of turnover - on RCM the AMC will pay the GST but but but ---- The AMC are also the service providers as well as giver for such distributors - so they will get 100 % GST input credit. - so effectively reducing the payout to the distributors

Sanjay L Vora ARN NO :42736 Mumbai, 12 Jul 2017

I also agree that GST should be borne by end user. There is no question whether One`s income is in or above 20Lakhs.

krunal ARN NO :97204 Ahmedabad, 12 Jul 2017

Agree..GST should be Over and above Brokerage Rate. AMC need to realize the same. Or Atleast, they should Take the Local GST, So Small Distributor are not burdened by GST. Fact is all The AMC will take LOCAL GST number for their local payment but then they will not make payment to us from there because our agreement is with Center Branch. So, They should immediately Revise and should do the necessary to accommodate atleast smaller distributor.

bharat gandhi ARN NO :110898 MUMBAI, 12 Jul 2017

they can and they will deduct the GST of 18%. but registration is not compulsory for income upto 20 lacs. its the distributors decision whether to register or not below 20 lacs.

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