Posted On Thursday, Nov 10, 2016
First, a Flashback
In our interaction with you on 28th March of this year, we had written to explain an adjustment in the NAV of the Quantum Gold Fund ETF due to a legal interpretation issue with the VAT authorities of Maharashtra. We had stated in the article that while the matter of the outstanding VAT is still under litigation, the Trustee, the AMC Board and the Management at Quantum, including the Fund Manager, have taken the decision to pay the VAT liability and have charged it to the Scheme as on 22nd March 2016. The charges included the outstanding VAT liability for the period April 2008 to July 2013 and the interest (at applicable rates) charged on the outstanding VAT liability.
You may click here to read the full article to know the reasons why Quantum, and other fund houses affected by these draconian VAT rules have gone in for independent Appeals against the VAT authorities.
To reiterate, the NAV of the Quantum Gold Fund ETF was scaled down by ~Rs.2 per unit (Face Value of Rs.100) as an adjustment for the VAT. A detailed note on this was presented in Quantum Mutual Fund’s Annual Report of 2015-16.
We also stated that “if the courts decide in our favour, we will, no doubt, credit the liability amount thus debited, back to the scheme.
Meanwhile, on 18th March 2016, the Government of Maharashtra announced an Amnesty Scheme on tax payments, including interest. We would, in the interest of our investors, be studying the said scheme to see its benefits without compromising our legal interpretation of the matter.”
Coming to the Present
After evaluating the Amnesty Scheme announced by the Government of Maharashtra, our internal team (including the fund manager), along with the help of consultants, has decided to NOT avail of the Amnesty Scheme. The scheme involves settlement of the case by paying the 100% of the tax liability amount and 25% of the interest liability amount. The government would waive off 75% of the interest liability amount and 100% of the penalty components, if and as applicable. This scheme is for the pending cases of the period April 01, 2005 to March 31, 2012. Quantum has refused to be a part of the Amnesty Scheme as the VAT liability is NOT the result of a willful or negligent action on behalf of the fund house. Quantum was hit by the liability due to an interpretation issue and the flip-flop of the VAT authorities in allowing us the set-off in one year and suddenly not allowing the same subsequently.
According to the Government of Maharashtra’s interpretation, the receipts/income of all schemes offered by a fund house should be clubbed even if the other schemes are not dealing in goods/commodities as defined under the Act. The Mutual Funds are of the opinion that each scheme is an independent entity and is registered under SEBI as a separate business unit. Hence, Gold Schemes should be treated as an independent entity and the purchases/sales value of Gold Funds is only to be considered for calculation purpose. The purchases/sales values of all other Schemes should be excluded while arriving at the VAT liability in any financial year. There are no correlations between other schemes as all the schemes have independent fund managers, investors and books of accounts which are maintained separately.
When the MVAT rules were drafted, there was no concept of ETFs in the Indian mutual fund industry. The lawmakers too did not envisage the launch and demand of Gold ETFs. Hence, the provisions that were made at that time cannot be merely assigned to the Mutual Fund industry blindly. A separate set of rules should have been put in place. The Amnesty Scheme is meant for cases other than the question and interpretation of the law.
The internal team (including the fund manager) of Quantum has closely looked at this Amnesty Scheme and has recommended that we should not be availing of the same. These recommendations were shared with the AMC Board Members and the Trustees in the last Board Meeting. Our Board decided that it is in the best interest of our investors that Quantum Mutual Fund should not opt for the Amnesty Scheme and should continue to pursue the case. The Board also considered it prudent to take an opinion from external consultants. Accordingly, external consultants were duly appointed and they too have concurred with our stand that since the liability has risen out of an interpretation issue, Quantum should not avail of this Amnesty Scheme but continue fighting the case.
Quantum will therefore continue pursuing this case for our investors and wait for the outcome of the legal proceedings. We would like to assure our investors that Quantum will do whatever it rightfully can to address your best interests and manage your precious savings entrusted to us with utmost faith and prudence.
|Name of the Scheme||This product is suitable for investors who are seeking*||Riskometer|
|Quantum Gold Fund ETF |
(An Open-ended Exchange Traded Fund- Gold)
|• Long term returns|
• Investments in physical gold
Investors understand that their principal will be at Moderately High Risk
* Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Statutory Details and Risk Factors:
The views expressed here in this article are for general information and reading purpose only. The views expressed here do not constitute any guidelines or recommendation on any course of action to be followed by the reader. The views are based on the publicly available information, internally developed data and other sources believed to be reliable. The views are meant for general reading purpose only and are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the readers. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and opinions given fair and reasonable. Recipients of this information should rely on information/data arising out of their own investigations. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investments. None of The Sponsor, The Investment Manager, The Trustee, their respective directors, employees, affiliates or representatives shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this document.
Mutual fund investments are subject to market risks read all scheme related documents carefully.
Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.