The Indian mutual fund industry has entered a new phase of transparency and compliance with the latest regulatory changes introduced from 1st April 2026 under SEBI's Mutual Funds Regulations, 2026. One of the most significant updates is the restructuring of expense disclosures, which directly affects Mutual Fund Distributors (MFDs) across the country.
For years, distributors operated under a commission structure where GST was embedded within the payout. However, the recent shift has changed the way commissions are calculated and paid. This new framework has brought both operational challenges and financial implications for distributors.
In this blog, we’ll break down the latest changes, explain the GST on mutual fund commissions, and understand the impact on Mutual Fund Distributors.
What Changed in Mutual Fund Commission Structure from April 2026?
Earlier, mutual fund expense disclosures were shown under a single umbrella term called Total Expense Ratio (TER). This included management fees, operational costs, and taxes.
From 1st April 2026, SEBI has replaced TER with two separate components:
1. Base Expense Ratio (BER)
BER includes the actual operating expenses and management fees charged by the Asset Management Company (AMC).
2. Statutory Expense Ratio (SER)
SER includes statutory charges like:
• GST
• Securities Transaction Tax (STT)
• Stamp Duty
• Other government levies
This separation is aimed at improving investor transparency by clearly showing where their money goes. While this is beneficial for investors, the GST on mutual fund commissions has become a major concern for distributors.
How GST on Mutual Fund Commission Worked Earlier?
Under the earlier TER system, distributor commissions were inclusive of GST.
For example:
If an AMC paid ₹100 commission, the GST portion was already adjusted within that payout.
This meant:
• GST-registered distributors paid tax.
• Non-registered distributors kept the full amount without any compliance burden till their threshold did not breach.
The system was simple, predictable, and easy to manage.
How Does the New BER-SER Model Work?
Under the new model, the commission structure has changed.
Now:
-
The base commission is reduced by approximately 15.25%
-
GST is no longer part of the commission
-
GST reimbursement is provided separately only against valid invoice submission
This creates three different outcomes depending on the distributor’s GST status.
Impact on Mutual Fund Distributors Based on GST Registration Type
The impact on Mutual Fund Distributors varies significantly depending on whether they are registered under GST or not.
Non-Registered Mutual Fund Distributors
This category includes MFDs earning below the GST threshold.
What happens now?
Earlier:
• Commission received = ₹100
• GST liability = ₹0
• Net income = ₹100
Now:
• Base commission = ₹84.75
• No GST reimbursement
Why is this a concern?
Many small and mid-sized Mutual Fund Distributors operate below the threshold. For them, this is a direct reduction in revenue for the same Assets Under Management (AUM).
This segment is among the most affected by the new GST on the mutual fund framework.
GST-Registered Mutual Fund Distributors
There is no change for the GST-registered MFDs. Distributors registered under regular GST can raise invoices and recover GST.
How it works:
Earlier:
• Commission = ₹100 (including the GST component)
• GST is later to be filled by the partner.
Now:
• Base commission = ₹84.75 (over and above)
• GST is reimbursed separately via invoice along with the commission amount.
Financially, the impact is limited.
However, the GST payments are now released post submission of invoices, which has resulted in a lag of two weeks in receipt of GST reimbursement. It may result in some cash flow issues for such MFDs.
Composition Scheme Distributors: The Most Affected Segment
Composition scheme distributors face the toughest challenge.
Why?
Because:
• They pay tax under composition
• They cannot issue proper tax invoices
• GST does not reimburse
This creates a double impact:
• Lower base commission
• Continued tax burden
This is one of the biggest hidden consequences of the revised GST on mutual fund policy.
Reduction in Expense Ratio: Another Earnings Blow for MFDs
Apart from GST restructuring, the reduction of 5 basis points in BER has further impacted distributor income. Since the reduction is applicable to the entire AUM, the income of MFDs has reduced to that extent.
• Combined with the BER-SER change, the total reduction becomes substantial.
• This has intensified the impact on Mutual Fund Distributors, especially for smaller AUMs.
Families with Multiple ARNs: A Bigger Problem
Many MFD businesses in India are family-driven.
It is common to see:
• Husband with one ARN
• Wife with another ARN
• Children (who have attained the majority) with separate ARNs
Individually, each ARN may remain below GST limits.
But under the new system:
• Each ARN faces the full reduction separately.
• This can create a significant combined income loss for the family.
Should an MFD now get GST registered to get the GST reimbursement from AMCs?
It is an important question being faced by the MFDs who have avoided being registered under GST so far. It is important to note that if you, as an MFD, expect your annual income to be above Rs. 20 lakh (including all sources), then you must register under GST by law. It will increase the compliance cost and add operational burden. However, on the positive side, you can claim input credit on business expenses where GST has been charged. For the same, you will need to provide your GST details to your service provider / vendor. For example, office rent or telephone bills.
For an MFD below the threshold income of Rs. 20 lakh, it does not appear to be economical to go for voluntary GST registration, as the compliance costs could be higher than the benefit of input credit.
Why the GST Impact Is Minimal for Nivesh Partners?
While the industry is adapting to these changes, Nivesh has ensured that its partners continue to grow without major disruption.
There was no further deduction of GST for the MFDs working with the Nivesh platform. So while other MFDs saw their income decline by 25% to 50% due to the combined effect of GST and expense ratio reductions, Nivesh partner MFDs had an average income decline of about 10%, primarily on account of the expense ratio reductions.
Further, in times like these, it becomes important for MFDs to focus on growing the business to offset the reduction in earnings.
At Nivesh, the goal is not just to offer competitive payouts but to build a complete business ecosystem for partners.
Our partners receive:
• Fully Digitalised Platform
Manage clients, transactions, reports, and investments seamlessly from one place.
• Multiple Product Offerings
Expand beyond mutual funds with a wide product basket to diversify income streams.
• Dedicated Relationship Manager (RM)
Get personalised business support for smoother operations and faster issue resolution.
• Marketing & Branding Tools
Access ready-to-use marketing creatives, branding support, and lead-generation resources.
• Partner Support System
A dedicated backend team to assist with operations and compliance.
• Training & Knowledge Sessions
Regular workshops, webinars, and updates to keep you ahead in the industry.
• Best Competitive Brokerage Rates
We offer competitive commission structures designed to help partners scale faster.
• GST Reimbursement Support
If GST is applicable to you, Nivesh reimburses your GST with the commission amount..
Build a Business That Grows Beyond Commissions
Instead of focusing only on payout reduction, our partners focus on growth. With the right support, many Nivesh partners have successfully achieved up to 5X business growth.
That’s the difference between just earning commissions and building a scalable wealth business. This is the right time for distributors to rethink their business structure, improve operational efficiency, and align with platforms that offer stronger support.
Because in the new era of mutual fund distribution, growth will not depend only on commission rates but on the ecosystem you build around your business.
