KARACHI: National Clearing Company of Pakistan Limited (NCCPL) has collected and deposited Rs8.8 billion capital gain tax (CGT) in national exchequer and issued annual CGT certificates to around 219,000 investors during the financial year 2020-21.

The amount of CGT collected in the current financial year is significantly higher in comparison with Rs1.7 billion of the financial year 2019-20.

The NCCPL has been mandated by Federal Board of Revenue (FBR) to compute, determine, collect and deposit CGT in the national exchequer and the implementation of CGT system has provided a mechanism to assess CGT without direct interaction of tax officers with the investors.

The CGT regime was implemented by NCCPL since April 2002 on promulgation of the Finance (Amendment) Ordinance by the President of Pakistan. Initially the regime was applicable to local and corporate investors trading at PSX and later in the year 2014, the regime was extended to include foreign institutional investors and thereafter in 2016-17, the unit holders of Mutual funds investors of future commodity contracts traded as Pakistan Mercantile Exchange were included in the regime.

NCCPL has developed an automated system to compute CGT from the information available from trading, depository and clearing system without any manual process. Although it is not mandatory for market participants to use NCCPL's CGT system to discharge their CGT obligations, however most of the investors continue to avail this unique facility.

The success of CGT regime from FBR's perspective can be gauged from the fact that FBR extended its scope to include more classes of investors in the regime while its success from investors perspective can be gauged from the fact that there are only less than 100 investors opted out from this regime from an investor's base of over 200,000.

Muhammad Lukman, Chief Executive Officer (CEO) of NCCPL, while talking to Business Recorder, said that the development and implementation of CGT system was a major breakthrough not only for the market participants but also for FBR in terms of documenting tax collection from capital gains generated through trading in securities market.

He said that the NCCPL has developed an automated CGT system integrated with trading system at PSX and depository system at CDC and has connectivity with all commercial banks to collect and refund CGT in a seamless manner in a paper free environment. He added that automation is in line with the Prime Minister's directive to devise a system for tax assessment without direct interaction between taxpayers and tax officials.

Since the implementation of CGT system, deposit to national exchequer has increased tremendously, however its quantum on year to year basis depends on trading levels and variation in the KSE index.

Copyright Business Recorder, 2021