Ultimately service receiver has to bear as its indirect tax,

If AMC charges Service tax from us than I suggest all our collegue from mutual fund distribution whether individual, Non. Individual or corporate ARN holder please get together and fight for our right. If needed we should take legal route as indirect tax can not be levied by service provider and it needs to be collected from consumer of services. I also request all big corporate distributor to please fight on behalf of we small individual distributor as you can always raise voice with great force and I am sure they will listen

This is the time to promote advisors and thus help them increase investment awareness in unexplored areas, this type to step by govt on a small number of MF advisors is not actually a good step.the thought should be given a second thought before implementing now.

Thanks Mr. Vijay Venkatram. Thank you for your enlightened article. It is becoz of wealthforum we r updated & motivated. Pls explain impact of ST on Direct & regular plan separately. So that we can know its effect on difference of both plans.

It is a sensitive issue for all IFAs and specially those who have annual turnover bellow Rs.1000000/-. If other service providers are exempted from S/tax if the turnover is bellow 10 lakh, why MF distributor is an exception? Either they should be exempted on the basis of some declaration OR should be subjected to the tax based on the Income Tax return. Let two departments co ordinate for the purpose. Alternatively, the exemption should be withdrawn for all businesses; which is ill affordable to the government. Secondly many have expressed the the problem of TER of the scheme. I do not understand how there is a ceiling to expenses (TER) without having any cap on its components? Thus, if there is ceiling on TER as % of AUM, then its components also should also be defined and frozen.

Thanks wealthforume for this simple nice explation.If it happens as per the above explanation,it will be very fine but investors might receive less units due to deduction towards recovery of service tax as it happens in insurance policies now.In that case too,the distriburors will have tough time to convince the investors as they will think that entry load is back or the distributor is charging them this way or they might thing anything else.

Thank you ! it was very much required to at least keep us motivated till we finally here anything . New comers should not worry about it much .. it a part of the Business and life should go on...

Thank you for the above analysis. The fact remains that Srvc tax is paid by the person ultimately being the beneficiary of Service. The MF and AMCs are the Providers of Service and ultimate beneficiaries of service being Investors. An amc is entitled to charge to the Investors for services offered by way of Fund management charge and expenses debited to schemes which it is permitted by various regulations. The agent or distributor only receives a small sum out of the fund magt charge and Expenses charged by the AMC. It would be unfair to charge the distributor as he does not received any money Investors in his bank account. AMCs should charge the service tax to the investment pool as they control of funds. Charging the distributor service tax would mean 14% over and above Income tax tax slab of 30.9% or 20.6% or 10.3% = 44.9% or 34.6% or 24.3% total tax paid by distributor .

I cannot deny our PM aspect in collecting much taxes likely small players may be exempted i.e., who receive less than 10 lacs per annum. AMC should deduct tax and put it in a reserve account at the end of the year if commission is above 10 lacs it should be paid to govt. Or it should be refunded to the Advisor

Sir, Please ask our finance minister to sell an mf application in the remote areas of country where i work, only than he could realise how hard an IFAs work is. unlike banks and other looters ( who dont sea anything like risk profile and product suitability other than commission) IFA had to have first educate the investor preaching endlessly about market voletility, differance between insurance and mf, financial goals and tools to achieve them, than IFA waits to sea if investor is comfortable with the information given.only than he goes for scheme suggestions, form filling, cheque collecting, issuing statament and on and on. and this demon of service tax growling out of door. will and can our finance minister justify this tax ?

Thank you for your enlightened article. The Government has to drop the proposal. The distributors cannot pay service tax as they are paying income tax for the income earned as commission from the fund houses. Hope the Govt. will see reason and remove from taxation .

Sir, Achhe din is a proverb and is not possible with any govt body. Govt only believe in making money directly or indirectly,hats in india

If AMC charges this service tax to us I urge all our distributor colleague to write to CBDT and our FINANCE Minister that why we are getting exploited by such a high tax rate where service provider has to pay service tax due to no clarity in finance bill why always poor section get exploitation while strong side like AMC get away with at as they have muscle to fight it with anyone and as individual we find it difficult

I am also.very sure that AMC will charge this service tax to us only which they did in the past also I also urge all our AMC they should look at this and keep the distributor motivated by absorbing this service tax by themselves or from investor as we are acting as mediator between you and investor and either you or investor receiving services from us and Service tax which us indirect tax should be charged to recepiebt of services and not from provider in this case distributor are providing services and either AMC or investor consuming it If distributor charged for it than he is denied even basic deduction and exemption too so all other tax payer pay 0 tax up to 7L income as a distributor we will pay 98000 as tax

If service tax is charged to distributor than it is like paying 44% as taxes at peak income by distributor so its like you have to pay to service either AMC OR INVESTOR the person who putting effort for minisicule commission will be at receiving end and ppl who enjoying services AMC or Investor will have last laugh in india which has tendency towards Fixed deposit, Gold and real estate for investment purpose and huge risk aversness there and from those people distributor try to convince to put in mutual fund is a uphill task, Distributor have to put lots of efforts time and money to get the customer with a view that if investor stay invested for long tern he will earn knowing that investor may pull out money if he see huge profit in short period if time I urge AMFI to protect the distributor as anyways this is not very income lucrative business but I sell it because I feel this is right investment instrument from investor perspective

I have spoken to a few AMCs and it is clear from 1st April 2015 the service tax will be deducted from the commission payable to distributors. Period

service tax is withdrawn two years back, now it should not be again implement, because at that time it is withdrawn after lot of discussion. I think it should be more discussed with the government to withdraw this implimentation

Important point is in DIRECT cases will service tax be levied and on whome ?

Being a Mutual Fund Distributor, I was always under the impression that I was providing a service to my clients & not to the Mutual Fund or te AMC. If we were servicing Mutual Funds or AMCs there was no need for us to file the sort of self declaration that we do every year. Also AMFI has the powers to suspend us for Mis-selling. I dont think any AMC cares what we sell as long as we sell. It is thus obvious that in the minds of the wise men at AMFI & SEBI we are supposed to be servicing investors. Why then is the Finance Ministry interpreting it as a service that we provide to the Mutual Fund or the AMC? If that be the case then let the Mutual Fund/AMC be free to decide the value of our service and remunerate us accordingly and let not SEBI decide how much we get paid. It is high time AMFI rewards distributors for colecting money from us and giving us nothing in return for all these years.

Dear sir, we the MF advisors,already less paid. out of this we have to pay service tax 14% is very difficult. It is very diffiult to lead our life in future.So i reqest please remove this service tax at least for MF advisors. T/U.

Brokarege service tax paid by investor to a Stock broker. Its same the business. So finally it pay by the investor of MF.

Service tax rules i.e. who earns 10lacs p.a. and then pay the s.tax individualy. This is correct or not? Below 10lacs earning Distributor why pay the s.tax ?

Yes you are absolutly right. Service tax should pays by who consume the services , not provider

After thorough reading the above article, I believe it is the AMCs who will try to pass on the Service Tax burden on Consurmers ie. Investors. However, AMC s already have cap on TER. This will also widen the gap between DIRECT and REGULAR schemes if S.Tax is charged back to the scheme. Some profitable AMC can bear a portion of this S.TAx to their Balance Sheet as without the Distribution help they would have lost assets in last few years to near Zero. When Tide is down very little enterprising investors would venture in the market and hence a significant drop in AAUM of AMC s.

very well explained thanq u sir

If the service tax is met by the amc and the pair to the distributor made service tax neutral, by virtue of the removal of exemption, wont the distributor have to pay service tax on his income from mutual funds as he would then be deemed to have provided a service to the mutual fund?

Very well explained! When GOI wants to enhance investments into financial assets, why increase costs? Lets hope better sense prevails, so await AMCs clarifications

Explained in a very simplified manner. Thanks

Simplified explanation by you Sir. Great article.

govt main focus on service tax collection & slowly increase the services under st tax rules. finally burden to the common man. since the s.t is to be collected and pay. the service providers not objecting. no union or strong consumer forum is there to fight with this type of undemocratic way of bills.

As I understand service tax is levied only if turn over exceeds 10 lacs. If total commission in a year is less than the threshold can the distributor claim refund?

Mr.vijay, as usual a well thought out analysis articulated in a simplified manner. You are right in mentioning it should be "service tax neutral" position to distributor. How much onslaught a distributor is expected to bear??? 1. cap on commission payment 2. Service tax of 14 % through reverse mechanism 3. New guidelines by SEBI on who should Register as SEBI Registered Financial Advisor ?? It is high time that all Distributors Association and fraternity, irrespective of differences should unite and put forth firm views taking string out of your article. Otherwise, we have to meekly accept what ever is served.

When an IFA is permitted to charge Rs 100 to an existing or Rs 150 to a new investor,will the IFA have to pay tax on this earning?