Cloud of uncertainty over stock market; 15 days ultimatum from stock brokers & investors' forum

The only capital market of Nepal (NEPSE) is going through a new shock webs following the latest instructions from the Revenue Office which has made it mandatory for all the brokerage firms to settle down their outstanding Value Added Tax (VAT) dues. The four years old tug-of-war between the Revenue Office and the stock brokers surfaced to a new height as the former recently sent letters to the brokers urging them to register with VAT regulation and clear all the unresolved financial settlements. A meeting convened between the stock brokers, investors’ forum and several investors’ advocacy groups on Wednesday against the backdrop of the new instruction from the Revenue Office registered their collective disagreements towards this latest directive. The concerned parties have stood against the decision of Revenue Office that has sought to allow the stock brokers carry out their brokerage functions only after clearing their dues. The meeting has also issued a 15 day ultimatum to the Revenue Office and other concerned bodies to roll back the decision. The joint statement has urged the concern bodies not to indulge in irresponsive activities that could hurt the investors’ sentiment and jeopardize the stake of the financial sector with more than 1.5 million investors. The joint statement further claimed that no tax could be levied over the revenues of the stock brokers according to the provisions laid out in the Sales Tax Act 2023. It further highlighted that the service charges which the stock brokers receive from their customers have been regarded as the financial service throughout the 19 years of VAT implementation thereby exempting such financial services from registering with VAT office and paying the tax amount. The VAT directives 2069 (first amendment 2073) and its section 4.17 has prescribed that the entire act of stock transaction fall under the purview of financial service; hence providing a facility of tax exemption to such a service. The meeting has jointly appealed all the concerned parties to work for making a viable stock market that is free from the burden of VALUE Added Tax. It has strongly urged to roll back any decision that might have negative implication over the entire secondary market.