The MFD association explained that many MFDs, believing they were receiving net commissions, did not secure a GST registration number post-2017.
The Odisha MFD Association (Mutual Fund Distributors Association) has approached the GST Commissioner in Bhubaneswar, seeking leniency on penalties imposed on MFDs who failed to obtain GST registration after surpassing the Rs. 20 lakh threshold. The MFD association highlighted a lack of awareness among MFDs regarding the registration requirement as per Section 73 of the GST Act.
Section 73 addresses the determination of tax not paid, short-paid, erroneously refunded, or input credit wrongly availed or utilized for reasons other than fraud, willful misstatement, or suppression of facts. The appeal followed numerous MFDs receiving summons from the GST Commissioner demanding payment of unpaid GST along with substantial penalties.
The MFD association explained that many MFDs, believing they were receiving net commissions, did not secure a GST registration number post-2017. Consequently, some have faced penalties as high as Rs. 50 lakh due to their lack of awareness.
In response, the GST Commissioner assured the association that each case would be reviewed individually, and appropriate relaxations under Section 73 would be considered.
It is important to note that MFDs receive gross commissions inclusive of GST. The government exempts MFDs earning less than Rs. 20 lakh annually (Rs. 10 lakh in hilly regions like the North East) from paying GST across all financial products, including insurance and peer-to-peer lending. However, once an MFD exceeds this threshold, they must obtain a GST registration number and pay GST on incremental income for the first year and from Re. 1 in subsequent years.
By raising awareness and addressing these issues, the Odisha MFD Association aims to prevent future penalties and ensure compliance with GST regulations.
Also Read: GSTN Advisory on GSTR-1A: FAQs and Manual on Filing GSTR-1A
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