Captains of industry have been miffed by the government imposing the long term capital gains (LTCG) tax in the Union Budget.
The jovial atmosphere at the Federation of Indian Chambers of Commerce and Industry (Ficci) stopped as soon as Finance Minister Arun Jaitley confirmed that the long awaited LTCG tax would indeed be levied from now. However, corporate honchos regained their composure faster than the stock market which was still losing out at the time of writing this report.
Gains above Rs 100,000 made on the sale of mutual funds and listed stocks will be taxed at 10 per cent after one year. So far, there was no tax if stocks were sold after a year. The disappointment over the tax actually drowned out the industry's disappointment over the budget remaining silent on reducing the Corporation tax yet again.
"A per expectations, the government didn't have enough room for giving much to corporates and can only hope that the issue of corporation tax would be taken up next year." Ficci President and Chairman and Chief Executive Officer (CEO) of the Edelweiss Group Rashesh Shah said.
However, others were not so lenient on LTCG which continued to be the focus of discussions. "After introducing the LTCG tax, the government could have at least revoked the Securities Transaction Tax which had earlier been brought in lieu of LTCG." Y K Modi, Executive Chairman at Great Eastern energy Corporation said.
Jaitley, however has announced that capital gains made till Janaury 31 would be grandfathered. A 10 per cent tax on distributed income by equity-oriented mutual funds has also been proposed in the Budget. All of this combined lent to a general feeling in the room that the government needs to create stable taxation regime without major changes every year.
Shah also said that the 30 basis point slippage on the fiscal front coming at roughly Rs. 50,000 crore was not large and could be easily absorbed later.