Govt panel for tax changes

Suggests ending STT on equity derivatives, stamp duty on index ones; also for rupee's internationalisation,other changes

A government- appointed panel has recommended abolition of the securities transaction tax (STT) in equity derivatives.

The standing council on international competitiveness of the Indian financial sector also suggested doing away with the stamp duty on cash- settled products such as index derivatives.

After the Special Investigative Team ( SIT) on undisclosed money noted any investor wanting to invest through participatory notes could invest afresh as a foreign portfolio investor (FPI), the council said it wanted regulatory clarifications on these instruments, through which unregistered investors invest in Indian markets.

Tackling GAAR

It has also suggested the government take measures to internationalise the rupee on the lines of the Chinese renminbi and remove uncertainty about availing of treaty benefits under the proposed General Anti- Avoidance Rules ( GAAR) on taxes.

The finance ministry has asked the public to give suggestions on the councils report by October 6.

The council was constituted in 2013 under the chairmanship of the economic affairs secretary. It also comprises the chief economic advisor, financial sector experts and economists.

The report said since STT and stamp duty add to transaction costs in equity derivatives, “STT should be removed. Stamp duty should not be applicable to cash- settled products such as index derivatives, as there is no delivery of the underling (product) taking place.” STT, announced by then Finance Minister PChidambaram in the first Budget of the earlier government, is now levied on all sale transactions on futures &options.

It is 0.01 per cent of the traded price of futures and 0.017 per cent on options premiums.

A 0.125 per cent STT is payable on the settlement price by the buyer of an option that is exercised.

If STT is paid, there is no long- term capital gains tax but if it is not paid, the latter is levied at 10 per cent.

The global scene

“In India, the levy of STT is used to determine the applicable rate of capital gains tax, with transactions charged to STT attracting a lower rate of capital gains tax. In addition, exchange transactions on which STT is paid are deemed non- speculative and can avail greater tax set- offs. Since STT is not levied on the entire currency forward and options segment, these transactions may be liable to a higher rate of capital gains tax, and may be deemed as speculative for the purpose of availing tax setoff," the report said.

In the aftermath of the Chinese central bank devaluing its currency, many prominent voices in India, including the Reserve Bank of India ( RBI), have called for internationalisation of the rupee and sought to differentiate it from capital account convertibility.

Internationalisation refers to a state where exporters from other countries agree to take payment in rupees and where the currency risks in international borrowings are borne by lenders rather than borrowers in India.

According to RBI, countries that can borrow in their own currency are less susceptible to international crises.

“Consider a time- bound plan for internationalisation of the rupee, in line with the plans of the Chinese government for internationalisation of the renminbi,” says the report, listing it as a priority for the government and the financial authorities over the longer term.

On the controversial GAAR, announced in 2012 by then finance minister Pranab Mukherjee and delayed by Arun Jaitley in his 2015- 16 budget, the report stated: “ The proposed GAAR... offers insufficient guidance on availing treaty benefits even for existing categories of FIIs ( foreign institutional investors).” It wanted certainty over these aspects. Among the other proposals, the report calls for creation of a working group for common clearing among exchange- traded products, equity, equity derivatives and currency derivatives, removal of regulatory restrictions on domestic FIs participation in equity derivatives, allowing foreign entities with commodity exposure to participate in Indian commodity derivatives, and moving to residencebased taxation over the longer term.

BLUEPRINT FOR CHANGE

The panel suggested doing away with the stamp duty on cash- settled products such as index derivatives
The finance ministry has asked the public to give suggestions on the councils report by October 6
The council was constituted in 2013 under the chairmanship of the economic affairs secretary
The council comprises the chief economic advisor, financial sector experts and economists

Business Standard, New Delhi, 8th Sept. 2015

Data storage norm splits digital payments industry

Data storage norm splits digital payments industry India’s nascent digital payment industry could be thrown into disarray due to the demand by the Reserve Bank of India (RBI) that all user data be stored within the country, fears an industry grouping, which has termed the decision as “heavy-handed”, even as others, including the country’s largest digital payment provider Paytm, have hailed the move. In a bid to narrow the growing schism, the industry is planning to send a formal representation to the regulator highlighting its concerns, a top official told ET. “We are trying to build a consensus on the issue," said the person adding that the representation to the central bank will be ready this week. RBI on April 6, mandated all payment companies—global and local—to set up data storage facilities within India by October. The stringent six-month deadline has attracted the ire of several sections of the industry that fear it will lead to a disruption of wel...

Sebi to finalise options in commodities today

The Commodity Derivatives Advisory Committee of the Securities and Exchange Board of India ( Sebi) will meet on Friday with senior officials of the latter, to give a final shape to the rules on options trading in commodity futures, beside revising the warehousing norms to ensure good delivery on settlement. The decision taken, after discussing with the advisory committee, will be placed before the regulator’s board, to finalise the regulations. According to knowledgeable sources, three commodities in each segment, agricultural and non- agricultural, have been proposed for introducing options. It appears commodities from the soya and guar segments are preferred in the former. From the non- agri segment, it is likely that gold, silver and crude oil will be finalised. All these These have better liquidity and both the National Commodity and Derivatives Exchange and the Multi Commodity Exchange, respectively, will be able to introduce the options. In the equity segments, options ar...

E tailers global warehouses may come under tax net

E tailers global warehouses may come under tax net Warehouses of e-commerce companies based in countries such as Australia, Japan, Italy, Spain, the Netherlands, and Russia may not be exempted from paying the income tax in India once the multilateral instrument (MLI) to prevent base erosion and profit shifting (BEPS) comes into force. BEPS refers to the reporting framework mooted by the Organisation for Economic Co-operation and Development (OECD) and signed by over 100 countries, including India, to prevent exploiting gaps and mismatches in tax rules to shift profits by multinational companies (MNCs) artificially to low-tax regimes. The representatives of 68 countries on June 7 this year signed an agreement (MLI) in Paris to amend their tax treaties to bring them in alignment with measures to prevent BEPS. However, there is still time for synchronising tax treaties with the multilateral instrument. India has submitte...

CA Online

Search This Blog