Residents of Sikkim, who hold 'subject certificates' and their descendants, are exempted by the Securities and Exchange Board of India (SEBI) from providing a mandatory permanent account number (PAN) for operating a demat account. This is also because Sikkim, a special category state, is governed by the Sikkim Tax Manual and not by the Income Tax (I-T) Act.
The subject certificate is provided to a person who had his domicile in Sikkim immediately before the commencement of the Sikkim Subject Regulation, 1961, when the state was a tiny kingdom ruled by the Chogyal dynasty.
In April this year, Pawan Chamling, former chief minister (CM) of Sikkim and president of Sikkim Democratic Front (SDF), warned about the drastic rise in the state-based traders' market share on Multi Commodity Exchange (MCX).
In a release
, he stated, "...it was found out that the market share of Sikkim-based traders on the MCX increased to 5.5% when it had been zero just a few years ago. Out of the total volume churn of over US$110 billion witnessed by the MCX, Sikkim's share was US$6 billion. There were only 674 traders from Sikkim based on unique client codes (UCC), a figure which has now increased to 2,217. This is a 400% increase in the number of traders, which is highly alarming."
"Sikkim is not the hunting ground for a team of greedy businesspeople and cheap politicians," Mr Chamling says, adding, "There is no doubt that traders are taking undue advantage of Sikkim's tax exemption to mint billions of rupees."
Coming back to the NSE circular, it asks trading members to send identity and address proof of all the newly on-boarded clients (irrespective of whether PAN has been submitted by the account-holder or not) to the Exchange, where the correspondence or permanent address of the client is Sikkim.
"Further, for the existing UCCs having correspondence or permanent address as Sikkim, irrespective of the status (active or inactive) marked in the UCC system of the Exchange, the trading members are required to carry out KYC re-confirmation exercise (i.e., verification of existing KYC documents available, against the details uploaded in the UCC system of the Exchange)," NSE says.
The Exchange has asked members to complete the activity before 15 September 2022. For KYC re-confirmation, members are asked to use the services of a qualified and practising chartered accountant (CA), company secretary (CS) or a cost and management accountant and submit a final audit report.
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