AMFI seeks simplication of GST rules for MFs

The Association of Mutual Funds of India (AMFI) has suggested many changes in the implementation of GST in the forthcoming Union budget for the consideration of the Ministry of Finance.

Some of the key changes suggested by AMFI are as follows:

1. Exemption from invoice from each mutual fund distributor

For claiming input tax credit under the GST regime, receipt of a valid tax invoice from the service provider (mutual fund distributor in the case of MFs) is necessary. Since AMCs have a large number of distributors throughout the country and collecting invoices from each distributor becomes a huge compliance burden for claiming input tax credit. Instead, AMFI has suggested that the commission statement generated by the Registrar and Transfer Agents (RTAs) should be sufficient for compliance with GST invoice guidelines.

2. Extension of Reverse Charge Exemption beyond March 2018

AMCs will be subject to reverse charge if the mutual fund distributor is unregistered. However, there will be no reverse charge for services availed from unregistered persons till 31st March 31, 2018. AMCs feel that they will be under a heavy compliance burden if reverse charge is introduced from April 2018. Hence, AMFI has requested for an extension of the current exemption beyond March 2018. Alternatively, AFMI has proposed that the current limit of Rs 5000 per day for exemption from reverse charge should be hiked to a minimum of Rs 15,000 per day.

3. Input Tax Credit availability on exit loads

AMCs claim there is no clarity on whether they can claim Input Tax Credit on exit load levied by them on investors. According to AMCs, GST levied on exit loads is not business income, but is credited back to the schemes. Hence, AMFI has suggested that GST on exit loads should be allowed to be taken as input tax credit.

4. Branch offices of AMCs not to be considered separate business entities for GST

The GST is applicable on transactions between related parties even if without consideration. AMCs branch offices in various cities have transactions with their head office. For the purpose of GST, both the head office and branch office are considered as separate business entities. But since the core function of investment management happens at the head office and branch offices only offer auxiliary services of sales and marketing, AMFI has suggested that these should not be considered as separate entities and that the GST credits accumulated at branch offices should be available for set-offs to the head office.

5. Reduction in invoice matching requirements on GSTN portal

AMCs want the number of fields to be matched on the GSTN portal to be reduced from five to just the GSTINs and Input Tax Credit availed by receiver if less than output credit or supplier.