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Sebi seeks easing of Budget’s STT proposal

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The Securities and Exchange Board of India (Sebi) has sent a list of market scenarios that can be kept out of the Union Budget’s proposal of levying capital gains tax on transactions of shares that were acquired by not paying the securities transaction tax (STT).
According to sources, the market regulator has recommended to the finance ministry that transfer of shares on account of inheritance, restructuring within companies and employee stock options (Esops) can be part of the exempt list. Some of the transactions involving foreign funds made without any consideration can also be included in the list, Sebi has said.
Sebi has not raised any reservations over providing relief to transactions such as acquiring shares through initial public offerings (IPOs) or through a bonus or rights issue, where typically the STT is not paid. These types of transactions were suggested in the Finance Bill by the government.
The Centre is expected to finalise an exhaustive list of exemptions in the next two weeks as the new regulations will come into effect from April 1.
This Budget proposal had created an uncertainty among market players. Sources say the Centre has been consulting Sebi and other stakeholders, such as legal experts and tax consultants.
Sebi’s stand on inter-promoter holdings could provide some respite in the Street. Many promoters have already rushed to carry out transfers among themselves to avoid higher taxation. Legal experts say some companies are waiting for more clarity on the issue before deciding their next move.
“Sebi has recommended all transactions under Section 47 of the Income Tax Act be exempted from capital gains tax, as the nature of these transactions is not commercial,” said a source. Section 47 deals with non-commercial transactions, such as gifts or transfer of assets within a family or a company.
The regulator also wants leeway for shares acquired through an Esops programme, a key incentive mechanism for India Inc.
Business Standard New Delhi,18th March 2017

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