The nightmare on GST compliance and fall in trail commission on older assets have been slowly pushing individual MF distributors to adopt online platform services and gain expertise in selling other financial products.

Since April, MF distributors attract GST of 18 per cent on the commission paid by MFs. This has not only made individual distributors to register for GST number but also upload proof of expenses such as office rent, technology software and travel to claim the GST deducted by MFs.

Moreover, the highest TER (total expense ratio) for equity scheme with AUM of ₹500 crore was reduced from 2.25 per cent to BER (base expense ratio) of 2.10 per cent. Expense ratio reduces progressively as the AUM grows.

The lowest TER of 1.05 per cent for equity schemes with asset of over ₹50,000 crore has been reduced to 0.95 per cent under BER. This has resulted in lower trail commission paid to distributors for asset accumulated over years.

This has resulted in trail commission falling 5-7 basis on older assets due to the lower BER.

As per AMFI norms, MFDs with GST registration must submit their invoices between the 7th and 15th of each month, following which RTAs will release the GST amount by the end of the same month.

If an MFD raises an invoice after the 15th, the payment is released in the following month, thereby reducing their income. Many MFDs are also facing challenges in submitting the invoice to claim input credit.

Arpit Shah, an independent MFD from Surat said the recent changes have started impacting smaller MFDs and his own monthly income of ₹1 lakh has reduced by ₹20,000.

Moving to a technology platform makes more practical sense today because it brings software, operations, marketing and client engagement together in one place, said Shah.

At the same time, to maintain the old income he has to serve far more clients than before and it becomes difficult to do manually after a point, he added.

Anish Raut, a MFD from Bhubaneswar said a 15–20 per cent reduction in trail income genuinely makes one think on sustainability of a fully independent distribution model.

Clients also expect broader financial solutions apart from MFs and hence becoming more organised and technology-driven is a compulsion for smaller MFDs, he added.

Aditya Agarwal, Co-founder, Wealthy.in, a wealth management platform said many distributors struggle on the operational side of GST compliance as tasks that took a few hours earlier are now stretching into 2-3 days, including documentation, reconciliation, invoice uploads and filing requirements.

In some cases, digitally signed invoice files become too large to upload to GST portals after digital signature, forcing teams to spend additional time on troubleshooting.

“We take care of the GST compliance layer with the AMCs, so that distributors do not have to coordinate separately with every fund house,” he said.

Published on May 23, 2026