Stock transaction likely to resume on SundayStocks transaction, which could not take place on Thursday in the country’s only secondary market, is likely to resume on Sunday, as stockbrokers, who had launched a protest to condemn the government’s decision to bring in stockbrokers to value added tax (VAT) regime, softened their stance during talks with officials of the Ministry of Finance on Friday.
Stocks transaction, which could not take place on Thursday in the country’s only secondary market, is likely to resume on Sunday, as stockbrokers, who had launched a protest to condemn the government’s decision to bring in stockbrokers to value added tax (VAT) regime, softened their stance during talks with officials of the Ministry of Finance on Friday.
Stockbrokers had completely halted stock transactions on Thursday after the Inland Revenue Offices (IROs) directed two stockbrokerages to clear the due VAT levied on commission amounts of the last four years.
The IROs on Wednesday sent letters to Investment Management asking to clear dues of Rs15 million. Similarly, Sundhara Securities was asked to submit VAT amount of Rs6 million. The IROs’ move took brokerage companies by surprise as VAT was never levied on commission generated by stockbrokers before.
Showing their disagreement, the stockbrokers had declined to take purchase and sale orders from the investors on Thursday.
A day after they launched the protest, stockbrokers were summoned by Revenue Secretary Shishir Dhungana.
During the meeting held on Friday, the Ministry of Finance said it would not roll back its decision to slap VAT on commission generated by stockbrokers, according to Santosh Mainali, general secretary of Stockbrokers’ Association of Nepal (SBAN).
“However, the ministry is positive about revising the due amount of the last four years,” said Mainali, adding, “The ministry has agreed to find out an alternative to recover the VAT of last four years.”
This means the stockbrokers may be given an option to clear the due VAT amount of the last four years in tranches.
As per the VAT Act, financial services related to banking and insurance are exempt from VAT. The law is silent on imposition of VAT on transactions taking place in the secondary market.
This implies the government can impose VAT on all kinds of services provided by stockbrokers and the capital market. “We will devise a mechanism to collect due VAT amount in the coming days,” Revenue Secretary Dhungana said.
Mainali said they are not against the government’s move to slap VAT on stocks transaction. “But the government should provide us a clear roadmap on implementation of the tax,” he said.
Nepal Stock Exchange (Nepse) General Manager Sitaram Thapaliya said the stockbrokers were positive about resuming stock transaction from Sunday. “Nepse
has urged them to continue the dialogue with the government while carrying out stock transactions,” Thapaliya said.
The government since last year has been mulling over bringing stockbrokers in the tax bracket. However, the government has so far failed to enforce the provision after stockbrokers protested the government’s move.