SEBI’s new Base Expense Ratio (BER) framework, coupled with the unintended impact of GST-related changes, has significantly affected the earnings of mutual fund distributors (MFDs), according to a Cafemutual survey.
In an opinion poll conducted on Cafemutual’s website and WhatsApp community, nearly 77% of MFDs said their monthly income has dropped by more than 20% following the implementation of the new expense ratio norms and GST-related adjustments.
Another 19% of distributors reported a decline of less than 20% in their earnings. While 3% said there was no impact on their income, only 1% claimed their brokerage income increased after the implementation of the BER norms.
The survey highlights growing concerns among distributors over shrinking trail commissions and rising operational pressure following the regulatory changes.
From April 1, 2026, SEBI reduced the expense ratio for mutual funds by up to 15 basis points (bps). Under the revised framework, the maximum Total Expense Ratio (TER) for open-ended equity schemes with assets below Rs.500 crore was reduced from 2.25% to 2.10%. Similarly, the TER for debt schemes with assets under Rs.500 crore was brought down to 1.85%.
In addition, SEBI excluded external taxes and statutory charges from the scope of TER—now renamed as Base Expense Ratio (BER). These exclusions include Goods and Services Tax (GST), stamp duty, Securities Transaction Tax (STT), Commodity Transaction Tax (CTT), SEBI fees and exchange charges.
Industry participants say the combined impact of lower expense ratios and GST adjustments has created a double blow for distributors.
An MF industry executive, requesting anonymity, said that many fund houses have passed on the 5 bps hit arising from exit load-related charges to distributors while also partially transferring the impact of lower expense ratios to them.
A CEO of an AMC, also speaking anonymously, said the industry is currently divided between listed and unlisted AMCs in terms of how they are absorbing the impact.
“Listed AMCs have largely passed on the full impact of the expense ratio reduction to distributors, whereas some unlisted AMCs have absorbed a portion of the reduction themselves. However, there is no denying that distributor income has fallen significantly because of the twin impact of BER changes and GST,” the CEO said.
A Mumbai-based MFD told Cafemutual that one fund house alone reduced his commission payout by nearly 50%. Overall, his income across fund houses has declined by around 16% after excluding the impact of mark-to-market loss/gains and GST.
A total of 2,782 MFDs participated in the Cafemutual opinion poll.
Poll Results: Impact of New BER Regulations and GST on MFD Income
- Hit of more than 20%: 77%
- Hit of less than 20%: 19%
- No change: 3%
- Brokerage increased: 1%
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