ISLAMABAD: Despite bullish trend in the market during 2012-13, the Federal Board of Revenue collected a meagre amount of Rs1.26 billion in the head of capital gains tax (CGT) from stock exchanges during July-2012 to June 2013 against its huge potential.
A look on the market index revealed that the Karachi Stock Exchange reached a record high during 2012-13, with the KSE-100 index setting new records trading above 20,300 level mid-May 2013. The KSE 100-index opened at 13,801.41 points on July 1, 2012 and closed at 18,043.31 in March 2013 showing a gain of 30.73 percent. However, despite this upbeat trend, the FBR collected a nominal amount of Rs 200-300 million as CGT on stock exchanges.
The CGT collection from stock market should have been much higher in a bullish market given that KSE index crossed 27,000 points recently. Currently, holding period of security is less than six months, the rate of CGT is 10 percent and where holding period of a security is more than six months, but less than 12 months, the rate of tax is 8 percent.
It is to be noted that the experts estimate potential of CGT at Rs100 billion.
According to 8th Schedule of Income Tax Ordinance, where a person has made any investment in the shares of a public company traded at a registered stock exchange in Pakistan till June 30, 2014, enquiries as to the nature and sources of amount invested shall not be made provided that the amount remains invested for a period of 120 days in the prescribed manner.
On the other hand, the revised CGT law authorised the National Clearing Company of Pakistan Limited (NCCPL) to collect taxes made on profits during the purchase and sale of shares in capital markets, and the NCCPL is responsible for depositing the tax collected to the FBR.
