Tax authorities bowl a GST googly to AIFs
private equity and venture capital world is in the crosshairs of the goods and services tax (GST) office.
About a dozen such alternative investment funds (AIFs) have recently received notices, with the revenue department questioning why their schemes, housing the fund pools, are not registered under GST.
These funds raise huge money every year and bankroll thousands of startups and listed companies.
Matter Taken Up with CBIC, Finmin
Amid spiralling assets under management of AIFs, the apex body, the Central Board of Indirect Taxes & Customs (CBIC), which levies and collects GST, it appears, wants to have a better grip and visibility on these fund entities.
The fund industry, however, is trying to put across the point that the schemes or the funds do not provide any 'service' and their earnings do not attract GST. In an AIF, the 'service' is provided by the fund manager — with the funds serving as pooling vehicles for the money received from investors — while the earning streams of AIF funds (interest and capital gains) are not subjected to GST.
Regulated by the Securities and Exchange Board of India (Sebi), AIFs are privately pooled vehicles incorporated in India, collecting funds from savvy investors for deploying the money in line with a defined investment policy. Unlike mutual funds, often the small investors' preferred vehicle for equity exposure, AIFs tap sophisticated investors who are ready to chip in at least Rs 1 crore and looking for upsides from startups and early-stage ventures.
AIFs are typically
