GST AND MUTUAL FUNDS IN INDIA: A CASE STUDY

The Goods and Services Tax is considered to be a revolutionary step in the Indirect Tax regime of our nation and is geared towards subsuming all other Indirect Taxes which are currently prevailing. In India, this reformatory taxation system became applicable from 1st July, 2017 and the jounce of Goods and Services Tax has been noted in the prices of almost the entire range of goods and services starting with manufacturers and going up to the end users. Since this tax covers services in its ambit, its brunt has also been felt by providers of Investment Services as well. Earlier a service tax of 15% was charged from the Asset Management Companies (AMCs) which in turn affected the scheme's Net Asset Value (NAV). After the implementation of GST this rate has been raised to 18% which has increased the expense ratio of the mutual fund houses by 3%. This rate of 18%has been prescribed for the financial service industry thereby leading to an increase in the tax liability for mutual fund distributors. This rise in the rate of tax leads to an increase in the expense ratio of mutual fund schemes and the blow is ultimately taken by the consumers i.e. the mutual fund investors. This case study is geared towards understanding the impact of Goods and Services Tax on Mutual Funds in India.