After Finance Minister Arun Jaitley introduced LTCG tax on equities in Union Budget 2018, leading to a negative sentiment in the stock markets, PMEAC member Surjit Bhalla says that he doesn’t see much revenues flowing to the government from the move. Interestingly, Finance Minister Arun Jaitley had expected Rs 20,000 crore flowing to the government from long-term capital gains tax on equities in the first year, and even more after that.
“In view of grandfathering, this change in capital gain tax will bring marginal revenue gain of about Rs 20,000 crores in the first year. The revenues in subsequent years may be more,” Finance Minister Arun Jaitley said in his Budget Speech on February 1. Saying that his views are strictly personal, and regardless of whether he is a PMEAC member or not, Surjit Bhalla told CNBC TV18 that the estimated amount seems to be “outlandish,” and the government can get up to Rs 5,000 crore at best. “It (LTCG Tax on equities) does not fit the revenue maximisation bill and the tax revenues that are obtained are way outlandish from what I understand, Surjit Bhalla said.
Earlier last week, Finance Minister Arun Jaitley that it was the most appropriate time for the government to impose LTCG tax on equities. “The tax compliance levels are still low in India, and the space available in taxation policy is very limited for the government,” Arun Jaitley said adding that this was the most appropriate time to introduce long term capital gains tax on equities.
The government had been under fire, especially after the domestic stock markets corrected, leading the opposition to point fingers at the imposition of LTCG tax. Interestingly, the Finance Secretary Hasmukh Adhia said that the stock market correction is not because of the introduction of LTCG tax. “Markets are down, because global markets have gone down,” Hasmukh Adhia said told the media, adding that its unfortunate that the move came when the global markets are in turmoil.
“I think the LTCG is a very small part of the overall budget, which has been very balanced and looked at the overall needs of the economy. There’s a global event, the markets were also over-extended. The investors should not get too perturbed,” Rashesh Shah of Edelweiss Securities told ET Now in a recent interview.