Mutual fund distributors are staring at a sharp earnings hit from April 1 as a new Total Expense Ratio (TER) regime kicks in, slashing their take-home commissions by factoring in GST pay-outs.
Under the new TER structure, MFs will pay commission to distributors after deducting 18 per cent GST. For instance, unregistered MF distributors earning ₹1 lakh a month, will get ₹82,000 in hand after GST deduction of ₹18,000.
GST registered distributors earning a similar commission will have to remit GST of ₹18,000 and claim it from the fund houses after providing the requisite proof.
Last December, market regulator SEBI announced a structural overhaul of the Total Expense Ratio framework for MFs and unbundled all statutory levies.
Earlier, expenses such as GST on management fees, Securities Transaction Tax and stamp duty were bundled in the TER. Starting April 1, these will be excluded from the base TER and disclosed separately.
For investors, the changes in TER will improve transparency on charges levied by MFs. Fund management and operating costs will now be part of the Base Expense Ratio, while statutory costs such as GST, Securities Transaction Tax and stamp duty will be charged separately.
Moreover, a reduction in brokerage costs and removal of certain additional charges will reduce overall fund expenses by about 10–15 basis points for many equity funds.
When SEBI announced the changes, it was expected that the GST component will be borne by the AMCs. However, a note from RTAs has now revealed that the amount will be deducted from the commission paid to distributors.
The MF industry has about 2 lakh distributors with registered ARN, and about 25,000 join the profession every year. In all, 85-90 per cent of distributors are not registered for paying GST, according to industry estimates.
Aditya Agarwal, co-founder of Wealthy.in, a wealth-tech platform, said there will definitely be an impact of about 15 per cent in the income of distributors who are below the ₹20 lakh threshold income.
However, the equity market has been growing at great speed and MFDs are managing about 50 per cent of equity AUM.
Hence, even if a MFD does not add any new assets, just the mark-to-market growth can probably erase the drop in income in less than a year, said Agarwal, who works with over 6,000 MF distributors.
Shashwat Kumar, an Indore-based MFD managing ₹15 crore AUM, currently non-GST registered, said a 15 per cent impact on income is significant and the cost on compliance, tracking multiple AMCs, filings and reconciliations can feel overwhelming without a large back-end team.
“We all knew GST registration was inevitable and many of us were simply postponing GST registration. The change is accelerating that transition,” he said.
Published on March 26, 2026