Center will take about six months to announce rules that allow companies to list abroad.
The slowdown is likely to dampen the hopes of investors such as Tiger Global, Sequoia Capital, Lightspeed and many Indian startups who last month urged Prime Minister Narendra Modi to quickly announce rules for foreign listings that were given the green light nearly a year ago.
Two senior government officials said the rules will not be announced until February’s federal budget, as no decision has yet been made on how the government should tax major investors and retailers when trading Indian companies listed abroad.
A key concern is ensuring that major venture capital and foreign investors pay an equal long-term capital gains tax — about 10 percent — even if they leave an Indian company listed on foreign exchanges like Nasdaq, the six sources familiar with these private discussions
Three industry sources said that in order to convince the government, some investors, investment bankers and startups have suggested that an investor’s departure from an Indian company that may be listed abroad could be taxed under Indian law, if that investor has a significant stake of 10-20. per cent.
A senior government official said: “We have not yet made a final decision or set the structure..
We would like to get the tax if an investor leaves, no matter where he plans to put it.”
The Treasury Department, which is working on the new rules, did not respond to a request for comment.
Another concern the government tried to address was whether it can collect taxes from foreign private investors trading Indian stocks listed abroad, but it has decided to exempt such transactions, the two government officials said.
However, the rules will clarify that Indian nationals who make a profit from such transactions abroad will be subject to tax under local law, she added.
The debate comes as local businesses see better prospects of hitting high valuations with domestic listings following the stellar debut on the stock exchanges of Ant Group-backed Indian food delivery firm Zomato, which valued the company at $13 billion.
But many investors and startups want the option of a foreign listing because they say companies get better access to capital and higher valuations.
Some 22 investors and top Indian startups in a July letter urged Mr Modi to expedite foreign listing rules, calling it an “unfinished reform agenda”.
“Further delays in the rules will hurt the startup ecosystem as many companies are about to decide their foreign exchange plans,” said a venture capital industry source.
Overseas listing is a controversial topic in India
His opponents include Swadeshi Jagran Manch – the economic wing of BJP’s ideological parent company – who fears such listings will lead to less Indian regulatory oversight of domestic companies and could hit the growth ambitions of India’s capital markets.
“Indian investors will also not have the same access to these companies if they only list abroad,” Ashwani Mahajan, the group’s co-founder, told Reuters.
The London Stock Exchange told Reuters last year that it was in talks with several Indian technology companies about foreign listings.