No intention to introduce long term capital gains tax: FM

New delhi, May 20 (UNI) Stating that the 'India growth story' was intact, Finance Minister P Chidambaram today turned down the demand of the left parties to introduce long term capital gains tax and clarified that the government will not unilaterally revisit the Mauritius Tax Treaty.

'We are also not proposing to unilaterally review the Mauritius tax treaty," he said in an apparent attempt to pacify the turbulent stock markets.

During the last two trading sessions, the SENSEX registered the steepest ever fall in its history as well as experienced high volatility.

The Finance Minister was dismayed at some ''ill-informed reporting and editorialis by media organisations and asked journalists to be cautious while reporting on sensitive issues.

Mr Chidambaram said "The India growth story continues to be a growth story" and claimed that the fundamentals of the economy were "sound and strong"-- high GDP growth, buoyancy in growth of the manufacturing sector,low inflation and burgeoning foreign exchange reserves.

The Finance Minister said the circular issued by his ministry, which many believe triggered the crash, was only intended to solicit the comments of the public and there was nothing in it to suggest that FII's would be taxed a new rate. "The position in this regard is well known to the FIIs", he said.

''India has reserves of 163 billion dollars, inflation has been contained at less than four per cent, manufacturing has been growing at 9 per cent, monsoon has been encouraging and we expect a good monsoon,'' Mr Chidambaram said to butress his claim that the economy was going strong. Mr Chidambaram attributed the steep fall in the stock markets to a combination of factors-- hardening of global interest rates, attractiveness of other competing markets, sharp fall in international commodity prices and some metals.

''We accept that markets will rise and fall,'' he quipped.

The Finance Minister advised the retail investors to enter the bourses only after doing meticulous research, and in case this is not beng possible, they should take recourse to mutual funds.

Asked whether the FIIs were indulging in blackmailing the government, Mr Chidambaram said they were not the only players in the market. In the derivatives market, he said, their share was ten per cent of the total volume and in the cash section they accounted for nearly ten per cent of the entire transactions.

Mr Chidambarm said on May 15, FIIs were net sellers while Mutal Funds were net buyers. In four trading sessions, FIIs were net sellers to the extent of Rs 2005 crores, while mutual funds bought securities of a higher magnitude.

The Finance Minister was at pains to explain that the circular had never suggested a higher rate of taxation for FIIs, but merely drew a distinction between stock traders and investors. There was nothing new in this.

He said a report had stated that FIIs who were taxed at 10 per cent would now be taxed at 41 per cent. "This is a case of uninformed reporting", he remarked.

"Uninformed reporting and reactions to uninformed reporting are not desirable," he said.

The Finance Minister said the circular was only an update of an earlier circular and had brought together all the relevant judegments in this regard.

In any case, the assessing officers are supposed to take into account the various judgements on the subject.

Mr Chidambaram said FIIs themselves have registered differently as 'traders' and 'investors.' There were 70 FIIs which had registered themselves as 'traders,' he said and added that they do not have to pay Indian tax rates if they are registered overseas.

"FIIs know well the legal position", Mr Chidambaram said.

Mr Chidambaram commenced his press conference by saying that he wanted to issue a disclaimer."Everyone has become a capital markets expert. I want to clarify that I am not an expert".

The CPI (M) had asked the government to re-introduce the long-term capital gains tax and called for being vigilant against FIIs who, it said, had wrecked havoc in developing countries.

Mr Chidambaram said political parties were entitled to their opinion and he would not comment on what they had to say. But added in no uncertain terms that the government will not re-introduce lon-term capital gains tax.

UNI