Portfolio Management Services (PMS) providers charge fees for managing client portfolios. These fees typically include a fixed management fee and a performance-linked fee. Both components attract GST at 18%.
This article explains the GST treatment of PMS fees.
Management Fees and GST
The fixed management fee is typically charged as a percentage of assets under management (AUM). This fee attracts GST at 18% .
Performance-Linked Fees and GST
Performance-linked fees are charged based on the returns generated above a benchmark or hurdle rate. These fees also attract GST at 18% as they are consideration for services provided by the portfolio manager.
ITC for PMS Providers
PMS providers can claim ITC on GST paid for:
- Office expenses.
- Software and tools.
- Research services.
- Marketing and client acquisition.
- Professional fees.
SEBI Regulations and Fee Structure
SEBI has proposed changes to the PMS fee structure, including allowing a performance-linked component. GST is charged separately on the fees and is excluded from the Total Expense Ratio (TER) limits.
Compliance for PMS Providers
- Register for GST.
- Charge 18% GST on management and performance fees.
- Issue GST-compliant invoices.
- File GST returns on time.
- Maintain proper records.
Conclusion
PMS fees, including performance-linked fees, attract GST at 18%. Providers must comply with GST registration, invoicing, and return filing requirements.
At Anuj Desai & Associates, we provide expert advisory services on GST for PMS providers. Our team can help you structure your fee arrangements and ensure compliance.
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.