Commenting on the recommendations of the mutual fund advisory committee on the expense ratio proposal, Gautam Mehra, Leader - Asset Management, PwC India said “The expense ratio was envisaged for recovery of, amongst others, costs incurred by AMCs in management of funds. The levy of service-tax on fees collected by AMCs was introduced subsequently, effectively limiting the amount available for the AMCs. Removal of service-tax from the expense ratio is, therefore, a logical move.”
“Both the proposed changes of increase in the expense ratio by 25 bps and removal of the levy of service-tax from the expense ratio would incentivise investments in the MF industry, which has been facing strong headwinds. As managing MFs becomes more sustainable, it should help the investor community in the long run.”