AIFs and Portfolio Managers operate in a complex GST environment with multiple compliance obligations, ITC restrictions, and RCM requirements. A periodic GST health check can help identify risks, optimise tax position, and ensure full compliance.
This article provides a practical GST health check checklist for AIFs and Portfolio Managers.
1. GST Registration Review
- Determine whether the fund requires GST registration based on its category and activities.
- For Category I and II AIFs, assess whether they make any taxable outward supplies.
- For Category III AIFs, review turnover and registration requirements.
- For Portfolio Managers, confirm registration status.
2. RCM Compliance Review
- Identify all services on which GST is payable under RCM, including:
- Trustee fees.
- Legal fees from advocates.
- Import of services from foreign providers.
- Director's fees.
- Verify that RCM GST is paid in cash and reported in GSTR-3B.
- Check whether ITC on RCM payments is correctly claimed.
3. ITC Review
- Reconcile ITC claims with GSTR-2B.
- Identify blocked credits under Section 17(5).
- Review ITC on pass-through and reimbursed expenses.
- For NBFCs and financial institutions, verify Rule 38 compliance.
- Assess whether ITC on fund administration and back-office services is correctly claimed.
4. Pass-Through Expense Review
- Review all reimbursement arrangements.
- Determine whether pure agent conditions under Rule 33 are met.
- Ensure that invoices separately identify reimbursements.
- Consider the GST impact of expense recovery arrangements.
5. Export of Services Review
- Identify all services provided to offshore clients.
- Verify whether export of services conditions are met.
- Check LUT filing and renewal.
- Reconcile export revenue with FIRC/FIRMS.
- Review refund applications for unutilised ITC.
6. Documentation Review
- Maintain proper records of all GST payments and claims.
- Ensure that invoices are GST-compliant.
- Keep FIRC/FIRMS for all foreign remittances.
- Retain records for the statutory period.
7. Return Filing Review
- Verify that GSTR-1 and GSTR-3B are filed on time.
- Reconcile GSTR-1 with GSTR-3B.
- Check annual return (GSTR-9) filing.
- Review any notices received and ensure timely responses.
8. GIFT City Structuring Review
- For fund managers with offshore operations, assess the benefits of GIFT City structuring.
- Review GST exemption on management fees and carried interest in IFSC.
- Consider VCC and FME structures.
Conclusion
A periodic GST health check can help AIFs and Portfolio Managers identify compliance gaps, optimise ITC claims, and avoid penalties. The checklist above covers the key areas that require attention.
At Anuj Desai & Associates, we conduct comprehensive GST health checks for AIFs, Portfolio Managers, and financial services intermediaries. Our team can help you identify risks and implement corrective measures.
For a confidential consultation, contact us at office@anujdesaiassociates.com or call 9619456656. Visit our website at https://anujdesaiassociates.com or connect with our founder on LinkedIn at linkedin.com/in/ca-anuj-desai-122547230.