GST- MAGNA CARTA 2.0 OR DEMON 2.0

                                GST- MAGNA CARTA 2.0 OR DEMON 2.0 OR NEW INDIA 2.0

Magna Carta was a document signed in 1215 by King john of England , by way of which he signed away most of his powers and agreed to abide by law. 

So how can we compare the GST regime , which is coming into force from tomorrow, with such an archaic document?
This is rather funny and in good humour that I am trying to compare the two. Because the GST bill has been prepared by the Central excise and Customs department , who are writing away their far reaching powers and agreeing to abide by the new Code.
For more than 11 long years , the officers of the Excise, Vat, Service Tax and other miscellaneous departments have toiled through the archaic laws of the country to simplify and align them for the ease of doing business.
 GST has an immensely far reaching consequences for both the Manufacturer and The Service provider (M&SP) and the Consumer.
For the (M&SP) , it claims to not only reduce the number of taxes that they have to pay , but also the duplicity of taxes that they had to encounter. The business owners are rightly concerned about the number of online forms (called RETURNS) that they will have to fill.

For the consumer or the customer it promises to give him the right product for the intended price; which means that the GST which he will pay will go to the Government. This is unlike the situation now where the Service tax or the Vat is charged to the customer but not deposited with the government.
GST also promises the states of the fair share of their taxes depending on the economic activity that takes place in the respective state. This means that, a state which produces a car will get the proportionate amount of tax , unlike the loss of excise at present , where the tax actually went to the state of sale.

But this everyone knows or have read plenty of times.
What I am looking is entirely a different scenario.
What I see is a unique opportunity in a direction which can be called THE GREAT LEVELLER.
From the midnight of  1st july 2017, all the professionals and experts dealing with Central or State Excise, VAT, Service Tax and other knowledge base- will be challenged to learn and practice something absolutely new.
I agree , the ready-made softwares will make their jobs much easier; but same will apply to any other person who has basic intelligence but did not have any knowledge about all those taxes so far.
In my opinion we are knocking at the doors of an opportunity for all those young Indians who are out of college with miscellaneous degrees and no jobs for various reasons.
Here will be an opportunity for them to start afresh and quickly get their hands on the new tax code or GST code and find a way forward for them.
From 1st July there will be a plethora of Institutes which will teach GST through various softwares. But for once, there will be an opportunity at the end of those short courses.
For once a 20 year old intelligent youngster will have the same knowledge as a 50 year old Tax specialist; at least in theory.
The online procedures aim to seal corruption , which will be good for the new professionals- as no longer the older generation of tax professionals have any physical office to settle the tax matters of their clients. It will be all cut and dry.
There is also a small ... very small window that I see for the unskilled sales force at different small businesses or shops. So far they were paid pittance for their efforts of 8-10 hours. However now that there will be about 3 online return forms to be filled every month - there will be an opportunity for them to train themselves in rudiments of Computers. With this extra qualification, they will be able to double up as the " GST Return Preparers" and be more useful to their employer. In fact 8-10 small businessmen can pool in to share such a GSTRP .
With this hopeful and optimistic view , I call upon all those youngsters who are unemployed or underemployed to put their mind and effort in correct places and benefit out of this opportunity.

Magna Carta, meaning ‘The Great Charter’, is one of the most famous documents in the world. Originally issued by King John of England (r.1199-1216) as a practical solution to the political crisis he faced in 1215, Magna Carta established for the first time the principle that everybody, including the king, was subject to the law.

Magna Carta, meaning ‘The Great Charter’, is one of the most famous documents in the world. Originally issued by King John of England (r.1199-1216) as a practical solution to the political crisis he faced in 1215, Magna Carta established for the first time the principle that everybody, including the king, was subject to the law.

Magna Carta, meaning ‘The Great Charter’, is one of the most famous documents in the world. Originally issued by King John of England (r.1199-1216) as a practical solution to the political crisis he faced in 1215, Magna Carta established for the first time the principle that everybody, including the king, was subject to the law.

Case of a Mutual Fund Advisor/Distributor

                                       Case of  a Mutual Fund Advisor/Distributor (A/D)

Like all financial products, Mutual Funds too have an intermediary who connects an investor to the Asset Management Company by way of different schemes.
Right from the advent of Private Mutual Funds in the early 90's they helped in selection of  funds (which was not a big task those days, as the number of funds were a lot less), filling up the form(s) and doing the leg work. Even though the distributors were not too familiar or educated in Financial Planning , they did a reasonably good job for the money that they were being provided by the AMC as incentive.
The hey days were those of 2.25% entry load and almost 2% exit load, so the distributors were a happy lot with trailing commission of the investments flowing in as long as the investment was there.
This model of commission was in line with that of the LIC agents - whose commissions were intact "zindagi ke saath bhi zindagi ke baad bhi."
Then in the August of 2007, a benevolent SEBI chairman scrapped the Entry load and the MF schemes suddenly became cheaper. Further on the exit load became less and the further squeeze on the commissions.
However the trailing format of the commissions still stays on even though it has come down drastically to about 0.6% for equity and to about 0.12% for debt funds.
But what does TRAILING mean?
It means that if you made a modest investment of Rs.1.0 lac in the year 2000 and it has grown to Rs. 10 lac today- then your distributor will get the appropriate commission for each and every year till date  on not only the original investment but any successive purchases that you had made. This was a price for keeping you invested and I fully support it because most of the investors need that guidance and motivation from the distributor.
1.But what is their relevance today?
2.Do we need them with the Direct Schemes that the  MF companies have launched parallel to each "normal" retail scheme?
3. How safe are these distributors with regards to trusting our money with them?
4.What service are they really providing us with in these times of net transactions?
5. Finally! Can I have a mid way between the Normal Retail Plan and Direct Plan, so that I can pay what is the relevant remuneration for the service?

I feel that I am somewhat qualified to answer this question for two reasons:
1. I had always invested through a MF advisor/distributor for the entire period of my earning and investing life.
2. Though I spread awareness about investment and personal planning , I am not beneficially or gainfully connected with any person or entity who has a business interest in Mutual Funds or any element of Personal Financial Planning.

The Mutual Fund  Distributor: is still very relevant today , especially for a new investor and especially for the Seafarers, but only if he is a certified ADVISOR or a DISTRIBUTOR by the SEBI. He should also have a AMFI certification and his "own" ARN NO. Some distributors act as "sub brokers" to the main distributor on some commission sharing basis. These should be avoided as they are not qualified or experienced enough to guide an investor.
I feel that when one starts investing by way of Mutual Fund , one needs to learn a lot of nitty gritty which otherwise he may learn at his own cost...and what is more... an enormous opportunity cost.
It simply isn't easy to select a good fund with LOOOONG term view. A good advisor/distributor can help you with that.
There are over 1800 mutual Fund schemes to select from 48 AMCs. For a direct and that too a first time investor this can be a mammoth and a daunting task.
Hence starting off with a  A/D is a good and certainly recommended idea. Yes there comes a time after 3-4 years , in which if you have taken active interest and your portfolio has satisfactorily progressed- then you may consider going Direct.
However, my experience with fellow investors is that once they start getting good returns from their MF investments and good advice from the A/D , they prefer to stick with him , as the feel that a small timely advice has saved them lacs and even a crore at times.
A question you may ask here- How do you know if my distributor of Advisor is genuine or not; or if he is acting in my interest.
Answer: Check your portfolio. If your A/D has ever enticed you to invest in a Closed ended Fund, NFO at the peak of a bull run (because such funds never come in the down turn times). Further on if your share in such funds is actually quite high... then you have all the reason of knowing that the scheme was sold to you for his 4% upfront commission and even attractive trails.
{However you can also kick yourself for not reading my e-book available for free from marineinsight.com :)}.
Answering the Third question is much easier. A Mutual Fund scheme is a contract between you and the MF AMC. The A/D is just a conduit to have connected you to the right scheme or not. He will fill your forms, get your KYC done and kick-start your investment. If you have issued a cheque from your designated account in favor of the MF scheme- even a fly cannot hurt your investments- you are 100% safe.
Mutual Funds are so heavily regulated and hence safe that  even you will not be able to invest from an account which is not connected with that particular Portfolio.

Fourth Question is about their service which they (A/D) provide outside of what we can get on the net.
As you have seen quite often on the net, the amount of information is mind boggling. If Financial Management is not your profession , chances are that you will never get the info which is relevant to you.
An A/D helps you with the precise info and services that you may need.
There is also an element of hidden knowledge. The A/D keep meeting with the Fund Managers of most of the AMCs at various seminars arranged for them for their education enhancement. At these seminars the Fund Managers and even the CIOs/MDs of the AMC discuss long term views of their funds. In addition the A/D gets personal messages and alerts in case government changes or is about to change a policy. This information can be made available to you in good time to benefit.
The final question being if you can find a mid way between going for Retail Plan and paying commission or losing out by going for direct plans.
Yes there can be a mid way- Ask your distributor to go for a Direct plan and set up a commission model with him. Since he gets only 0.60% as trailing commission (that is if your investments continue for the entire year), you can set up a different model which can be beneficial to you and him. I am sure with the great ingenuity that the Indians are blessed with, you will be able to find a good middle road.

I do not think any more queries would remain after this article.
In case you have then post a query here or send me an email on kaushik.the.idiot@gmail.com .