Skip to main content

Govt panel for tax changes

By
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

Comments

Post a Comment

Popular posts from this blog

Govt’s gamble on GST cuts: What do the bond and currency markets signal?

By
  It’s not just humans who suffer from cognitive biases; markets do too. Interestingly, different financial markets exhibit distinct biases, each interpreting events through its own prism of prejudice. Take the recent announcements on GST reforms: equity markets have chosen to view them through the lens of growth, while bond and currency markets are focusing on potential macroeconomic risks—fiscal pressures and current account challenges. So, which lens captures the true pulse?Equity markets may be right in expecting GST reforms to revive consumption, which has remained lacklustre for a while. But the key question remains—will this revival come at the cost of broader macro stability?It is well known that consumption stocks have rallied since the GST rationalisation announcement. But what about bond markets? What signals are they sending since this rejig was announced from the ramparts of the Red Fort?The signs aren't encouraging. Bond prices have slumped and yields have surged sinc...
Post a Comment
Read more

Luxury carmakers urge clarity on GST rates to boost festive season sales

By
  A clear picture regarding new GST rates at the earliest will help the overall auto industry, including the luxury car segment, to regain momentum in the ongoing quarter, which generally sees enhanced sales on account of the festive season.The high-powered GST Council, chaired by Finance Minister Nirmala Sitharaman, will meet on September 3-4 to discuss moving to a two-slab taxation.In an interaction with PTI, BMW Group India President and CEO Hardeep Singh Brar said the recent speculation about the change in GST rates has caused uncertainty in the minds of consumers.Consumer interest and demand is strong, but they (prospective buyers) have adopted a wait-and-watch approach, and this delayed decision-making is impacting new vehicle sales at a certain level, he noted."Expediting clarity on GST rates is essential to get back to speed and ensure the auto sector's contribution to economic growth during this quarter is robust," Brar stated.He also hoped that the sustainable p...
Post a Comment
Read more

Sebi proposes tighter norms for green bond third-party reviewers

By
  Sebi on Friday said it has proposed to tighten the norms to appoint independent third-party reviewers or certifiers for green debt securities to align them with requirements for other ESG-linked bonds.In a draft circular, Sebi said that the current norms for green bonds, introduced in February 2023, lack detailed requirements around reviewer independence, conflict of interest mitigation, and disclosure standards that are now in place for other ESG-linked securities under a June 2025 circular.The regulator's latest proposal seeks public comments on a revised framework that would bring parity by incorporating comprehensive criteria for third-party certifiers of green bonds on non-convertible securities.Under the proposed norms, issuers of green debt securities will need to appoint reviewers who are independent of their management, directors, and key managerial personnel. These reviewers will be remunerated in a way that prevents any conflicts of interest and possess relevant expert...
Post a Comment
Read more