The Associated Chamber of Commerce and Industry announced that it has asked the Finance Ministry to remove the provision in the draft Direct Tax Code to tax capital gains arising on indirect transfer of Indian assets, as it can have implications in various international transactions.

In a representation to the Ministry, the chamber has stated that the capital gains tax can adversely affect cross-border mergers and transfer of Indian shares, including American Depositary Receipt and Global Depositary Receipt in foreign capital markets.

Assocham also said that the levying of the Minimum Alternative Tax on the assets of companies, as proposed in the Tax Code, will have a significant impact on cash flow for companies, because it is more like levying a wealth tax for loss making companies and those yet to start business.

It said that this is especially relevant for capital intensive/infrastructure companies with long gestation periods.