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.
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.