Under the Goods and Services Tax Act the statutory tax rates for all products and services have been announced and are in effect from July 1, 2017. It is a revolutionary step that will subsume all indirect taxes. The impact of GST will be witnessed on prices of all commodities and services from the manufacturers to the end customer. The financial services including investment segment will also be influenced. However, there will be a marginal impact of GST on mutual fund industry as well.
The expenses incurred by Asset Management Companies (AMCs) that affect the scheme’s Net Asset Value (NAV) attracted service tax that was charged at the rate of 15%. Post GST implementation the service charges have hiked by 3 per cent, increasing the expense ratio of mutual fund houses across the country to 18%.
The 18 per cent rate slab is standardized by the Government authorities for the financial service industry which means GST for mutual fund distributors has increased tax liability. However, the influence of it will be faced by the large distributors only. The smaller distributors, who are earning below ₹ 20 lakhs per annum are exempted from the taxes. The advantages of this newly formed rule can be availed by the distributors earning less ₹ 20 lakhs by registering for GST. This exemption is provided only to the locally operating distributors but the ones functioning at multiple locations have to bear the consequences.
The service tax on mutual fund, as per the new GST law, has to be paid at the place where it is consumed. Although, much clarification about the GST rates on mutual funds is not available some sources quote that the mutual fund advice will cost more and the things may turn less favourable for the distributors. While the consumer too can expect a subsequent rise in the expense ratio under most of the schemes.
Even after the rise in the expense ratio, mutual funds remain one of the best investment options and shows the positive growth. Providing the better returns in comparison to other traditional forms of investments, mutual fund is a trouble-free investment where the investor can trace the growth online from time to time. There are various portals that provide the platform to create portfolio according to your financial objectives and one such platform for mutual fund investments is Wishfin. It proposes a variety of funds to cater your diverse needs. The convenience of doorstep service and less paperwork make it easier for the customer to invest through Wishfin.