Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: cpt :: VAT Audit :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: articles on VAT and GST in India :: form 3cd :: ACCOUNTING STANDARD :: TAX RATES - GOODS TAXABLE @ 4% :: due date for vat payment :: Central Excise rule to resale the machines to a new company :: ACCOUNTING STANDARDS :: empanelment :: list of goods taxed at 4% :: TDS :: VAT RATES
« Service Tax »
  Simple GST, thanks to SAP and Assocham's tech resource centre
 Next steps for the goods and services tax
 Benefits of GST to home buyers In the next lifetime
 GST: Jaitley says yes to cess, no to additional tax for compensating states
 GST to enhance ease of doing business, says Assocham
 Govt sources say cess is a better option than high tax rate
 Goods and Services Tax: There should not be more than three grades of rates, says Chidambaram
 Chidambaram says there cannot be multiple tax slabs in GST
 Service tax officials transferred for favouring realtor
 GST, a challenge and opportunity for accounting professionals’
 Service Tax On Hotels And Restaurants – Recent Delhi High Court Judgment

Investors face service tax hit in mutual fund-distributor standoff
April, 16th 2015

Returns from mutual fund schemes will dip if investors find themselves at the wrong end of the raging feud between mutual funds and the distributors. An influential mutual fund distributor body — consisting of Citibank, Standard Chartered Bank, Aditya Birla Money, Bajaj Capital and NJ India Invest among others — has told the Association of Mutual Funds of India (Amfi) that these intermediaries would not bear the burden of service tax introduced in the Union Budget.

Financial Intermediaries Association of India (FIAI) has asked the asset management companies to bear the burden or pass it on to the investors. There are about 60,000 mutual fund distributors in the country, of which over 40,000 are IFAI members. If mutual funds include the service tax in the expense ratio —the amount that mutual funds charge investors — it will increase the cost of investing in their schemes.

From April 1, mutual fund distributors have to pay service tax of 14%. Soon after this was announced in the Budget, distribunettors had approached mutual funds to add the tax to the expense ratio. But, Amfi, the mutual fund industry body, said distributors have to pay it. The distributor body FIAI, in a letter to AMFI dated April 10, has argued that the service tax has to be borne by the recipient of the services.

"In no case, an additional burden of 14% is viable for any member of the distribution community to run their business as most are operating at less than 14% net profit margin," it said in a letter. FIAI, which has sought legal opinion from law firm Nishith Desai Associates, has threatened legal action against Amfi if it did not respond in 'reasonable time'.

The fresh conflict between mutual funds and distributors comes on the heels of a recent Amfi move asking mutual funds to limit the upfront commission they pay distributors at 1%. The upfront fee cap has hurt distributors, mainly the smaller ones. A source familiar with the matter said distributors are arguing that mutual funds are charging investors service tax over and above the expense ratio.

"If mutual funds are passing on the burden to unit-holders, why should distributors pay service tax," said the person in the know. At present, rules allow mutual funds to have an expense ratio of 2.5%, out of which 1.5% is the asset management fee. Till recently, a service tax of 12% was applicable on the asset management fee, which was charged to the client, pushing up the total cost to 2.68%. If the service tax levy is passed on to the investor, the total cost of investing in a scheme would be 2.86%, which includes 14% service tax. This would end up being higher if the scheme is bought by investors outside the top 15 cities.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Multimedia Presentations Multimedia Solutions 3D Solutions Corporate Presentations Business Presentations Multimedia Presentation India M

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions