‘Long-term capital gains are made by well-off people and the tax on it is justified’ 

Since long-term capital gains (LTCG) are made by the well-to-do people, it doesn’t make any sense to reduce or remove the tax, said a top official of Union Finance Ministry at a discussion meeting of Trade and Industry Representatives with the Union Finance Minister Nirmala Sitharaman, in Chennai, on Monday.

“In 2019-20, people made about ₹95,000 crore of long-term capital gains. About 80 per cent of those long-term capital gains were made by the people who are earning ₹50 lakh and more per annum. This year, the share may reach 90 per cent. These are just 0.1 or 0.2 per cent of the population. We are being accused of inequity in this country that the rich are becoming richer and the poor are becoming poorer. Giving relief in the case of LTCG will only increase money in the pockets of a few people,” said Tarun Bajaj, Union Revenue Secretary.

He was responding to a request for a cut in the tax rate for LTCG. Bajaj said the tax rate on LTCG is already on the lower side. If one can compare tax rates, one can notice that the other countries are charging long-term capital gains tax at the applicable rate of 25 to 30 per cent. These are the kind of rates in India we have 10 per cent. And the long-term period is 12 months,” he explained. 

N Srinivasan, Vice Chairman & Managing Director of India Cements, made a request to the Finance Minister for logistics support for the cement industry in the south by way of railway freight to transport cement to northern regions. 

“About 40 per cent of raw material for cement production – limestone – is in the south, and there is no ordinary portland cement in the north. Unless cement moves from south to north, there will be a shortage of cement in the north. The cement industry will be blamed for cartelising. Cement cannot be stored and if we store more than a certain amount of cement, we will be asked to be closed by the Environment Ministry. Projects are being held up,” Srinivasan explained. 

Responding to his remarks, Sitharaman said a meeting will be organised with the Surface Transport and Railway Ministries to take the matter forward.

T Kannan, Managing Director, Thiagarajar Mills, stated that a relentless increase in cotton prices in the past few months and likely drop in crop output have applied brakes on the strong export order momentum, spurred by government policies in the post-Covid era. “So, it is essential to have the import window open for 40-50 lakh bales and it is a very urgent need of the industry, he said. 

A Sakthivel, President, Federation of Indian Export Organisations, requested, among others, a freight subsidy scheme for a limited period for the benefit of MSMEs, as high freight rates due to recent global developments have affected exporters and their profitability.

In his memorandum, MV Ramesh Babu, President, Coimbatore District Small Industries Association (CODISSIA), sought, among other things, the launch of new loan schemes for start-up companies as also to extend the limit of collateral-free automatic loans for MSMEs to be provided to meet operational liabilities and restart businesses. Since prices of raw materials have skyrocketed a strong policy decision is needed to allow the import of all raw materials at zero import duty and to stop exports of all raw materials till the indigenous supply and prices are stabilised, to help the MSMEs.

Other requests included industry status for tourism and hospitality, incentives and level playing field to improve women’s participation in the workforce, higher tax benefits health insurance, higher budgetary allocation for education, and extension of PLI scheme for chemicals.