Skip to main content

Tax ambiguity clouds new financial sector initiatives

By
Instruments such as Reits, InvITs, unsponsored GDR, GIFT find few takers
At least five new fundraising avenues, despite having cleared with much fanfare by the regulatory authorities, have remained doubtful starters due to lack of clarity on the taxation front.
Instruments such as Real Estate Investment Trusts (Reits), Infrastructure Investment Trusts ( InvITs) and unsponsored depository receipts ( DRs) have failed to take off.
Even the Gujarat International Finance Tech, or Gift) City, has yet to see any business, despite many blue chip companies showing interest in set their shops there. An official said they were in the process of removing impediments to make sure these new initiatives take off. “The Department of Economic Affairs ( DEA) is in touch with the revenue ministry to clear these hurdles. The past two Budgets have had numerous announcements for capital markets. We are trying to iron out some of the pending issues,” said the official.
Reits, InvITs and unsponsored DRs were a part of Finance Minister Arun Jaitley’s maiden Budget speech. Subsequently, the Securities and Exchange Board of India (Sebi) cleared the decks to their launch by notifying regulations.
However, the regulations were not enough as these instruments got mired in tax ambiguity. Many real estate players are in active discussion with the finance ministry to solve tax issues. “ The market is finding it hard to launch these products, as there is tax complexity on components of income within these instruments, especially in Reits.
Further, lack of any special tax dispensation is making these instruments less attractive,” said Riaz Thinga, partner, Walker Cahdiok & Co.
Recently, the Sebi chairman stated that it had cleared all issues related to the instrument and what was pending was only tax clarity.
In case of DRs issued at back of shares is exempted from capital gains. However, DRs issued on the back of other permissible securities are not exempted. Additionally, there is no specific exemption from capital gains tax for conversion of a DR.
The revenue ministry has not been keen on clearing this hurdle, as they fear it could lead to money laundering.
Six months after the launch of GIFT in Ahmedabad, YES Bank became the first bank to start its banking operations. But, for exchanges, the wait could be longer.
“BSE is in the process of setting up a new international exchange in Gift City in partnership with Deutsche Borse. Regulations on the exchange side are already in place, but clarifications related to the Companies Act and tax matters are to be announced,” said Ashish Chauhan, MD & CEO, BSE.
According to the market players, it will come across as a half- hearted attempt if India doesn’t have a globally competitive tax structure for Gift.
“There is a need for special tax advantage for Gift such as removal of securities transaction tax ( STT), commodities transaction tax (CTT), a favorable withholding tax structure at five per cent,” said Thinga.
Business Standard, New Delhi, 4tth Nov. 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