Govt weighs options on easing FPI tax proposal
FM meets representatives of MFs, investment banks, FPIs
The government will soon take a decision on tweaking the foreign portfolio investor (FPI) surcharge proposal, which has spooked the markets since its announcement in the Budget last month.
According to official sources, changes could include exempting or ring-fencing FPIs structured as trusts or associations of person, a step which may require only a circular; reducing the impact of the tax by grandfathering their income for a few months; or making the transition from a trust structure to a company structure tax-neutral. “Currently, multiple options are on the table and no decision has been finalised yet. A few measures will be announced soon, now that the finance minister has met FPIs and market participants,” a government official told Business Standard.
On Friday, Finance Minister Nirmala Sitharaman, along with ministry officials, met representatives of mutual funds, investment banks, FPIs and others. Participants said after the meeting that it was mostly a one-way communication, wherein officials including Economic Affairs Secretary Atanu Chakraborty heard them out, but were noncommittal on the specifics of what the government would do. Market participants discussed various issues, including the ease of investing for both domestic and foreign players. "The FM has said that these issues would be resolved in a time-bound manner," said a participant.
Besides FPI surcharge, other issues that were discussed include abolishing the long-term capital gains tax, a review of the dividend distribution tax, simpler Know-Your- Customer (KYC) norms for FPIs, need for a stable tax regime, and reducing cost of transactions.
FPIs who participated in the meeting included Goldman Sachs, Nomura, Blackrock, CLSA, Barclays, and JP Morgan.