Mutual fund distributors seek to consolidate multiple registrations
A regulatory change by Sebi has removed the financial incentive for distributors to use multiple licences to avoid GST.
Asset management companies (AMCs) are receiving requests from mutual fund distributors to merge their assets under one registration, according to a Mint report. Previously, some distributors used multiple AMFI Registration Numbers (ARNs) in the names of family members to keep individual annual turnovers below the ₹ 20 lakh goods and services tax (GST) threshold.
The Securities and Exchange Board of India (Sebi) introduced a revised mutual fund expense framework effective 1 April. This change separates the base expense ratio (BER) from statutory levies like GST. Under this new system, AMCs pay the base commission separately, and the GST component is only paid when a registered distributor submits a valid tax invoice.
Unregistered distributors now receive only the base commission, which removes the incentive to split earnings across several ARNs to avoid tax. Anuj Mittal, a Delhi-based distributor, said maintaining multiple registrations now increases the operational burden because distributors must file separate tax returns and communicate with customers for each ARN.
Equirus Wealth managing director Pallav Bagaria said the change is positive for the industry as it encourages distributors to focus on growing operations rather than managing multiple registrations. Bagaria noted that the number of active distributors could decline over the next six to eight months during consolidation, though the total number is expected to grow in the long term.
To consolidate ARNs, a distributor must get consent from investors, who have 15 days to object. If there are no objections, the distributor must seek approval from the AMFI-ARN Committee and then notify their AMCs to route all future commission payments through a single registration.