New Delhi, July 2: Finance ministry officials today met representatives of the mutual fund industry and Sebi officials to discuss ways to boost growth in the sector, including possible changes in taxes.
As one of the measures, mutual funds wanted consumers to bear the burden of 12 per cent service tax on the purchase of schemes.
Meanwhile, the finance ministry and Sebi are keen on making the Rajiv Gandhi Equity Saving Scheme available to mutual funds. Ministry officials said the government was likely to come out with details by the end of this month.
The meeting comes a few days after Prime Minister Manmohan Singh, who took on the additional role of finance minister, said the country needed to resolve issues hampering the development of the industry.
Mutual funds have put up an anaemic performance in recent months. They managed Rs 6.6 trillion in assets in the January-March quarter, down from Rs 6.8 trillion in the October-December period.
“The sector faces a variety of constraints, encompassing both short- and medium-term issues and taxes,” R. Gopalan, secretary, economic affairs, told reporters today after the meeting.
He added that structural changes were necessary to address the medium-term issues but didn’t elaborate.
Separately, joint secretary for economic affairs Thomas Mathew said the government was likely to take steps to boost the sector in a month’s time.
The industry also made a case for managing the assets of insurance companies, floating pension schemes with tax incentives.
The association has suggested at the meeting that consumers pay the service tax on mutual fund sales instead of fund houses.
Another issue weighing on the sector is the capital markets regulator’s decision in 2009 to scrap the fees that asset management companies charged investors buying units.
Fund houses would use the money raised by such fees to pay commissions to distributors of mutual funds such as banks and finance companies. Scrapping such commissions took away distributors’ main incentive to sell funds.
Later, the finance ministry in a statement said, “the immediate plan includes steps that may have to be taken to energise the distribution network and to provide greater flexibility to AMCs (asset management companies) to manage the total expense ratio.”