Chance of Hike in Expense Ratio after GST

By Registrationwala

26th May 2017

 

GST will increase the  by 3% increase the implementation of Goods and services Tax (GST) from 1 July, the expense ratio of mutual fund houses across the country will also hike by 3%. Expense ratio is term used for the measurement of the cost for investment company to operate its mutual fund. GST will have however, benefit small MF distributors having an annual income of upto Rs20 lakh.

The government has exempted distributors’ annual earning up to Rs 20 lakh from paying service tax. Now a day, distributors earning up to Rs10 lakh as a commission are exempted from paying service tax. People should wait for the fine print before we jump to any conclusion. However, what I understand for now, is that expense ratio will increase marginally,

Plan of the expense ratio for direct plans is currently 1.8%, and 2.3% in case of regular plans plus the existing service tax of 15%. In case service tax increases to 18% then the expense ratio of these two plans will also go up.GST will be beneficial for the distributors with an annual income of upto Rs20 lakh and who comprise around 80% of total distribution force in the industry Experts also feel that mutual fund products are set to become costlier on implementation of GST.

In the present scenario, mutual fund attracts 15% service tax. However under GST, it would be increased by 3% to 18%.GST has become aggression for Fund houses. Implementation of GST will surprise positively as everyone is getting ready for a smooth transition. 

 

Chance of Hike in Expense Ratio after GST

2017-05-26