For nearly three decades, a mutual fund’s cost was a single bundled number — the Total Expense Ratio. From 1 April 2026, SEBI has broken that apart so you can see exactly what you pay the fund house versus what goes to taxes and trading. Here is what changed and what it means for your portfolio.
| Quick answer | Key point |
|---|---|
| What changed? | From 1 April 2026, the Total Expense Ratio (TER) is unbundled — GST, STT and stamp duty sit outside the Base Expense Ratio. |
| New core number | Base Expense Ratio (BER) — only the AMC’s management fee. |
| Why? | Transparency — you can now compare pure management fees across funds. |
| Does it cut my cost magically? | Not by itself — it makes costs visible and comparable, not free. |
| Distributor impact | Commissions are now GST-exclusive, cutting base payouts by roughly 15.25%. |
What is the TER — and what changed?
The Total Expense Ratio is the annual cost of a fund, expressed as a percentage of assets and deducted from the NAV each day. Under the SEBI (Mutual Funds) Regulations, 1996, it was one all-inclusive figure bundling the management fee, brokerage, GST, STT and stamp duty together.
The SEBI (Mutual Funds) Regulations, 2026 — effective 1 April 2026 — replace that with an unbundled structure. TER still exists, but now as the sum of three clearly separated components.
The new three-part structure
| Component | What it covers |
|---|---|
| Base Expense Ratio (BER) | Only the AMC’s fee for managing your money — the number you compare across funds. |
| Brokerage and transaction costs | Trading costs, disclosed separately and subject to revised caps. |
| Statutory and regulatory levies | GST, STT, stamp duty and exchange/clearing charges — now outside the BER cap, charged on actuals. |
The key shift: statutory levies like GST now sit outside the AMC’s fee cap. That ring-fences the management fee, so the AMC’s charge is clearly visible and not blurred by taxes.
What this means for investors
- Cleaner comparison: the BER lets you compare what different funds charge purely for management — useful when choosing between similar schemes.
- Visible taxes: GST, STT and stamp duty appear as separate line items rather than being hidden inside one number.
- Not an automatic discount: the change is about transparency and ring-fencing, not a guaranteed reduction in what you pay — though clearer caps can pressure fees down over time.
Treat the BER as your headline cost-comparison metric going forward, with the levy and brokerage lines as the variable add-ons.
What it means for distributors
The change reshapes how mutual fund distributors (MFDs) are paid. Commissions are now reset as GST-exclusive, which reduces base commissions by roughly 15.25%.
- GST-registered MFDs can recover the GST by raising an invoice against the AMC.
- Non-registered or composition-scheme distributors cannot, so they face a direct income cut — prompting many to consider GST registration or forming a corporate entity.
If you advise clients as an MFD, this is a good moment to review your GST registration status and commission structure.
The bigger SEBI overhaul
The TER unbundling is part of a wider rewrite. The 2026 regulations also introduce optional performance-linked fees, reinforce “true-to-label” investing (a fund must invest as its name suggests), and tighten governance accountability for trustees, boards and senior management. The common thread is cleaner, more honest disclosure for a market with AUM well over Rs. 70 lakh crore.
How this fits the bigger picture
The TER reform sits at the intersection of investing and tax: it pulls GST and STT out of the bundled fund cost and shows them as the statutory levies they are. For investors it sharpens cost comparison; for distributors it makes GST registration and invoicing central to how commissions flow. It pairs naturally with the year’s other capital-market changes, like the STT hike on derivatives and the buyback shift to capital gains. For tax-side planning on equity gains, see /blog/new-tax-regime-fy-2026-27.
Key takeaways
- From 1 April 2026, the mutual fund TER is unbundled into BER + brokerage + statutory levies.
- GST, STT and stamp duty now sit outside the AMC’s fee cap.
- The BER becomes your headline number for comparing management fees.
- It is a transparency reform, not an automatic cost cut.
- Distributor commissions are now GST-exclusive, cutting base payouts ~15.25%.
Frequently asked questions
What is BER and how is it different from TER? The Base Expense Ratio (BER) is only the AMC’s management fee. TER still exists but is now the sum of BER plus brokerage and separately disclosed statutory levies like GST, STT and stamp duty.
Is GST removed from mutual fund costs? GST is not removed; it is moved outside the Base Expense Ratio and disclosed separately on actuals, rather than bundled into one TER number.
Does this lower my mutual fund cost? Not automatically. It improves transparency and ring-fences the management fee. Clearer caps may push fees down over time, but the change itself is about disclosure.
When did the new TER framework take effect? From 1 April 2026, under the SEBI (Mutual Funds) Regulations, 2026, which replace the 1996 regulations.
How are mutual fund distributors affected? Commissions are now GST-exclusive, reducing base payouts by roughly 15.25%. GST-registered distributors can recover GST via invoices; non-registered or composition distributors face a direct income cut.
Which costs now sit outside the BER? GST, STT, stamp duty and exchange/clearing charges, along with separately disclosed brokerage and transaction costs.
Mutual fund me GST hata diya gaya hai kya? GST hataaya nahi gaya — use ab Base Expense Ratio ke bahar alag se dikhaaya jaata hai, taaki investor ko management fee aur taxes alag-alag saaf dikhein.
What should investors do now? Use the BER as the main number when comparing funds, and treat the levy and brokerage lines as variable add-ons rather than ignoring them.
Questions on GST registration or fund-related tax?
If you are a distributor weighing GST registration, or an investor unsure how fund costs and capital gains interact at tax time, Regikart’s CA & CS team can help. Reach us at +91 70444 94804 or [email protected], or see our services at /gst-registration.
About the author
CA & CS Team
Reviewed by Regikart at Regikart. Want to discuss this in the context of your business?
