Govt fails to impose VAT on stockbrokers
Jul 17, 2017-
The government has failed to implement value added tax (VAT) on stockbrokers commission as the Ministry of Finance (MoF) has yet to finalise the modality. The government’s plan was to charge VAT on stockbrokers commission from Sunday.
Earlier, the MoF had been tasked with getting stockbrokers registered in the VAT. With the new provision, the government had been looking to impose 13 percent VAT on the stockbrokers’ commission amount. However, the ministry failed to come up with clear and concise instructions on how to achieve that.
Revenue Secretary at the MoF Shishir Dhungana said they were working to formulate the procedure for bringing in the stockbrokers’ earning through commission in the tax bracket. “We have been consulting with experts on how the government could enforce VAT in the sector,” Dhungana said.
Amid the posturing by the government, stockbrokers have shown resistance towards VAT. According to them, it is inappropriate to charge VAT on the commission as they already share a certain portion of the commission with Nepal Stock Exchange (Nepse) and Securities Board of Nepal (Sebon).
Anjan Raj Poudel, a stockbroker at Thrive Brokerage House, said the enforcement of VAT in the secondary market could raise the operating cost significantly. “As the VAT is ultimately passed on to the investors, it will definitely cause extra financial burden on investors, which in turn affects the transaction in the country’s only secondary market,” said Poudel, adding that the stockbrokers are licenced by Inland Revenue Office under the heading of the financial sector.
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.
Poudel said they were agitated mainly by the government asking them to clear the dues made in their last four years. The government had even issued letters to two stockbrokers—Investment Management and Sundhara Securities—to clear their VAT amount with penalty, interest and other surcharges for the last four years. This was to get stockbrokers to comply and register in the VAT.
“We are ready to register in VAT from this fiscal year provided the government enforces the law to do so,” said Poudel adding that the logistics such as system software, mechanism of CDS and Clearing along with the software being used at the stockbrokers should be made compatible for the VAT regime.
ASBA becomes mandatory
Kathmandu: Applications Supported by Blocked Amount (ASBA), a system that allows purchasing the primary shares only through banking system, has officially come into full-fledged operation with Securities Board of Nepal (Sebon) making it mandatory from Sunday. Earlier, the system was optional for the merchant bankers who were liable to issue initial public offerings and further public offerings.
Sebon Spokesperson Niraj Giri said the investors willing to invest in primary shares now have to use a bank account for the transaction.
The implementation of ASBA is expected to make the application process of primary shares hassle free. Giri said with ASBA in effect, the board has planned to reduce the shares allotment process to 15-20 days from present 30-60 days.
Published: 17-07-2017 08:50