With the aim to further develop the alternative investment industry, a SEBI panel on Friday recommended suitable tax as well as regulatory framework for AIFs.

The suggestions of the committee, chaired by Infosys co-founder NR Narayana Murthy, also recommended social enterprises as a separate category of alternative investment funds (AIFs).

To incentivise offshore fund managers (who invest in India but operate from abroad) to shift their fund management and administration to the country, the panel has suggested a suitable tax and regulatory framework for domiciliation of AIFs in International Financial Services Centres (IFSCs).

Further, it has pitched for allocation of Corporate Social Responsibility (CSR) funds to Category I AIF — Social Venture Funds.

Also, it said nominee and non-executive directors appointed by AIFs on the boards of their portfolio companies should be excluded from the provisions of GST.

“The issue of levy of GST on such profit-sharing between Limited Partners and General Partners may lead to uncertainty. It should be clarified that GST is not applicable on distribution of share in income or profits to General Partners or their employees,” the panel said in its 157-page report.

The regulator had constituted a 21-member standing committee — Alternative Investment Policy Advisory Committee — in March 2015 with the mandate to prepare a new regulatory framework for alternative investments. This is the committee’s third report. It had submitted its first and second set of recommendations in January 2016 and November 2016 respectively.

The Securities and Exchange Board of India has sought comments from the public till February 9 on the report.

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