Jun 06, 2018 2 min read

GST Impact on Mutual Fund's Exit Load. Here’s the List of All Changes it will Bring Along

Exit load on mutual fund's will not attract GST. Read to know all about its implications.
India’s biggest tax reform, GST or Goods and Services Tax had come to reality just a year back on July 1, 2017. The introduction of the same has brought along several changes in the lives of mutual fund investors. And now, just after a year, the government has again clarified GST applicability on financial services.

With its introduction earlier, it had brought along marginal impacts on the mutual fund investments and this time; it is affecting almost all the financial services. This write-up is all about what implications will the GST levy bring for the investors. So, let’s get started!

What Has Happened?

GST will now be applied to exit loads charged by mutual funds, additional interest cost to defaulters in payment of loan installments, and late payment charges levied by credit card companies. The relief is that securitization, derivatives, future contracts, and forward contracts in commodities; unless entailing actual delivery of products, will not be liable to this tax as was introduced on July 1, last year. In case of banks, ATMs will not constitute a place of business, and thus will not trigger GST registration. Further, when multiple branches provide the services to a customer, the branch which is handling the account of the customer will pay GST and all the others will be deemed to proffer services to the main branch. Considering the case of import of gold, integrated GST will be applied once on the import, and not again when it is appropriated by banks. This is an additional step to reduce litigation.

Clearing the Air

Due to chaos in the market concerning the GST implementation, the central board of indirect taxes and customs (CBIC) has issued a detailed document clarifying the applicability of the same recently. It aims to remove ambiguities around the tax applicability on various transactions and consequently narrows down the scope for future litigation as stated earlier. The document further seeks to reduce the compliance burden on financial institutions which they already have to register in all operating states and file multiple returns.

What Has Changed for the Mutual Fund Investors?

Going with the view of experts at MySIPonline, there are several mutual fund schemes which charge exit load on redemption before 365 days. The GST levy on the exit load will, therefore, not be a major hiccup for the investors as they hardly redeem their investments before one year. All it will affect is the liquidity factor that mutual funds offer. Besides, it will help one to keep investments at least for one year and enjoy the benefit of high returns due to increased tenure of investment.

If you wish to know more on the same, connect with us via phone call or email. We, at MySIPonline, provide the best of recommendation on mutual fund investments. Connect with us at the drop of a hat to seek advice on making your personalized portfolio.

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