Mutual fund distributors in India have requested tax relief following the Securities and Exchange Board of India’s (Sebi) overhaul of the expense ratio structure, which took effect recently. The revised framework separates GST and statutory levies from the base expense ratio, altering how distributor commissions are calculated and paid, according to livemint.com.
The Association of Mutual Funds in India (AMFI) has been urged by distributors to adopt the reverse charge mechanism to mitigate income losses caused by the new expense ratio regulations. The changes have disproportionately impacted small distributors, especially those exempt from GST, who face significant reductions in their commission earnings, the report said.
This regulatory adjustment comes amid broader efforts by Sebi to enhance transparency and reduce costs for investors in mutual funds. The expense ratio overhaul aligns with global standards but has disrupted existing commission structures. The move has sparked concerns among distributors about sustainability, with calls for policy tweaks to balance investor protection and distributor viability.
AMFI is currently reviewing the requests from distributors and considering the adoption of the reverse charge mechanism. The outcome of these discussions will be pivotal for the mutual fund distribution network, which plays a crucial role in retail investor participation in India’s financial markets, livemint.com reported.