KPR Mill becomes Budget victim; withdraws share buyback scheme after new tax

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Published: July 12, 2019 5:03:10 PM

After the government introduced buyback tax of 20 per cent in the Union Budget 2019-20, KPR Mill becomes the first company to withdraw its Rs 263.31 crore buyback on account of increase in the amount of buyback obligation after the tax proposal.

CBDT, Taxpayers, Form 16, Form 16A,Form 26AS, TDS, Form 24Q, Budget 2019, Tax Consolidation, union Budget 2019, Budget 2019 india,High Effective Tax Rate, ETR, tax rate, income tax, income tax actKPR Mill becomes the first company to withdraw its buyback proposal after the government imposed 20% tax

After the government introduced buyback tax of 20 per cent in the Union Budget 2019-20, KPR Mill becomes the first company to withdraw its Rs 263.31 crore buyback on account of increase in the amount of buyback obligation after the tax proposal. The company’s shares tanked as much as 6.25 per cent after the company announced its plan of withdrawing its buyback proposal. However, the shares recovered earlier losses. Its shares opened at Rs 571.25 per share in the morning against the previous close of Rs 608 per share on BSE. 

On April 30, KPR Mill had announced its plan to purchase 37.50 lakh equity shares, representing 5.17 per cent of the total number of equity shares in the paid-up share capital of the company, at a price of Rs 702 per share for a maximum amount of Rs 263.31 crore. The company said today it is not permitted to meet the buyback obligations beyond the amount approved by the board of directors and shareholders of the Company and the same can also be effected only with the borrowed funds, which is prohibited by law.

KPR Mill said when the company had decided to come out with the buyback when the buyback tax was neither contemplated nor prevailing. The company was unable to file the ‘letter of offer’ and go forward with the proposal which had been earlier conveyed to SEBI,  according to its exchange filing.

In a bid to discourage the listed companies from avoiding dividend distribution tax or DDT through buyback of shares, the Finance Minister Nirmala Sitharaman in her Budget speech on Jul 5 had proposed an additional tax of 20 per cent in case of buyback of shares. Before the Budget 2019, the companies could opt for buyback of its shares instead of paying dividends, that’s the government introduced the buyback tax to plug this loophole.

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