KATHMANDU, July 16: The CDS and Clearing Ltd -- a subsidiary of Nepal Stock Exchange (Nepse) -- started the process of dematerializing share documents from Monday in preparation of full-fledged Central Depository System(CDS), an online based share trading, by mid-January next year. The move comes despite lingering confusion over how to impose tax on transaction of stock and absence of related bylaws.
Though the government had hoped to introduce the CDS from the beginning of the current fiscal year, the system couldn´t come into operation due to the absence of Clearing and Settlement bylaws and confusion over the tax to be levied in share transactions.
The bylaws is awaiting endorsement at the Securities Board of Nepal (Sebon) while the government is still yet to decide whether to continue the Capital Gains Tax (CGT) or transaction tax as suggested by CDS and Clearing Company in share trading.
"Though we have become successful to start the process of dematerializing -- a paperless documentation -- of the shares of listed companies at Nepse from today (Monday), we need at least six months for CDS system to operate in full swing due to lack of Clearing and Settlement bylaws and confusion over the tax system on share trading under CDS," said Dr Jiba Nath Dhital, chairman of CDS and Clearing Company.
Dhital said a team has been formed to suggest the mode of operation to ensure the full-fledged operation of CDS within six months.
"We have also requested Sebon to endorse the Clearing and Settlement bylaws at the earliest and asked Nepse to give permission for clearing and settlement of stocks under the CDS," said Dhital.
So far, Nepse has been undertaking the task of clearing and settlement of shares under the paper based system. Dhital also said the company will request the finance ministry to settle the confusion over imposing tax on share trading.
According to the company, a total of 33 share investors, including Finance Minister Barsha Man Pun, have opened their online share transaction accounts through depository participants -- the intermediaries between CDS and investors, on Monday -- the first day of fiscal year 2012/13.
Subodh Sharma Sigdel, CEO of CDS and Clearing Company, said the dematerialization of shares will be completed within six months.
As per the CDS Regulations, the company must introduce full-fledged CDS within the next six months. Sebon had given permission to the company on August 24, 2011 to operate CDS. It got operating license from Company Registrar Office on April 13 this year.
Source: REPUBLICA
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