Share trading resumes

We are happy that the govt reversed its irrational decision, which can never be implemented

  • Ambika Poudel, chairperson, Nepal Investors Forum

Kathmandu, June 6

Trading in the country’s only share market resumed today afternoon after the government rolled back its earlier decision to revise the method of calculating capital gains tax on trading of bonus and rights shares for two weeks.

Share investors, agitating against the decision to levy 7.5 per cent CGT on the difference of actual price of share traded and its base price (Rs 100 per unit), had halted share trading yesterday and for the first two hours today. Trading started around 1:00 pm for two hours after the government withdrew its decision. Subsequently, Nepal Stock Exchange index rose by 1.1 the or 13.91 points to rest at 1,282.75 points by the time of closing.

Talking to THT, Uttar Kumar Khatri, joint secretary at the Economic Policy Analysis Division under the Ministry of Finance, clarified that the government had withdrawn the calculation method of CGT introduced by the Inland Revenue Division on Sunday for now, but the rate of CGT would be 7.5 the as announced through federal budget 2018-19.

Yesterday, the MoF had formed a committee led by Khatri to examine the revision in CGT calculation and suggest an amicable solution. He expressed optimism of finding a solution that would be acceptable to all concerned.

Investors had been protesting against the IRD circular that imposed CGT on difference between the actual price of shares traded and base price of bonus and rights shares (Rs 100 per unit share).

“We are happy that the government reversed its irrational decision, which can never be implemented because investors will not pay capital gains tax when there is no capital gain,” said Ambika Prasad Poudel, chairperson of Nepal Investors Forum, citing the falling stock prices in the secondary market along with the increased supply of shares. “If the government thinks it reasonable to levy CGT on bonus and rights share by taking reference of the face value of Rs 100 per unit share, why not compensate the investors for loss incurred?”

Earlier, the government used to enforce five per cent CGT on trading bonus and rights shares in the secondary market. Along with the increase in the CGT to 7.5 per cent through the federal budget 2018-19 on May 29, the tax administration had also changed the CGT calculation method. Prior to the enforcement of the new rule, CGT used to be enforced on the income made from the difference in actual price of shares traded and adjusted base price of stocks. Adjusted base price of the stock means the price of stock immediately before book closure plus the value of shares received from rights and bonus divided by the number of shares.

While the traders had started submitting 7.5 per cent CGT on shares traded from the very next day of budget presentation, they had followed the earlier calculation method till the IRD circular was enforced on Sunday. As per the provision of the settlement of trading within three days of trading, the shares traded on Monday will be settled on the basis of the old provision of CGT calculation, according to Nepse.