Mutual fund distributors have been quite slow in providing their Goods and Services Tax (GST) numbers to the Association of Mutual Funds in India (Amfi), even though a month has passed since the new levy was implemented on July 1.
According to sector sources, only about 6,000 distributors out of nearly 90,000 have furnished their GST numbers. Amfi had asked the distributors to provide their GSTN by July end, failing which, fund houses would deduct 18 per cent from their brokerage fees.
Sector officials attribute the slow pace in GST submission to the fact that a majority of the distributors do not come in the threshold limit of Rs 20 lakh income a year. "They might be of the view that they need not take the GST number and provide to Amfi," said one. However, he noted, fund houses had informed distributors in June that GST was a law and every entity needed to comply with it.
Sector executives preferred not to be named for this report. A top chief executive explained, "There is resistance among distributors. No doubt, it is unfair, especially for smaller distributors who are far away from the threshold limit of Rs 20 lakh. It is quite unwarranted to put so many administrative hassles which are cumbersome for smaller distributors when their net payment of GST would be zero."
According to N K Prasad, president of mutual fund registrar and agent CAMS, "I believe almost all the big distributors have registered their GST numbers. Smaller distributors, however, might take time."
Dhirendra Kumar, chief executive of fund tracking entity Value Research, said, "GST is an operational hassle for small businessmen, including small distributors of MFs who operate from their homes. It is nothing but a penalty for them. Earlier, they had to pay 15 per cent service tax. Now, they have to pay 18 per cent GST, whether or not they are meeting the threshold of Rs 20 lakh income per annum."
Small fund distributors are termed the sector's foot soldiers. Officials in the sector say these people often do not have an office of their own and operate from their homes — there is nothing which they can show for input credit. Further, many would require assistance from chartered accountants, adding to their costs.
Meanwhile, sector experts say, those yet to provide their GST numbers would get their first jolt when they get brokerage (net of GST) by or before August 10.