Delhi: Foreign investors have welcomed the move to
impose a turnover tax. But, they want the tax on the seller,
and not buyer''s side. The turnover tax is a hotly debated
issue among all market participants and opinion is divided
over whether it will be a positive step in the long term.
One opinion says that it will, instead, be regressive
and cause volumes to dry up. But, there''s one common ground
- the tax should be at the point of sale.
Kumar Sinha, managing director, Oppenheimer Asset Management,
says, "The only negative is that it has been put
on the buyers rather than sellers, whereas in most markets
it is at the point of selling. I do not understand why
it should be put in at the point of buying, because when
foreign investors are bringing in money into India, they
should not put in a tax at the point of entry. It is only
when they have decided to sell, and realised a return,
if there is a tax employed at that time, it is more fair
and feasible. Why penalise someone at the point of entry."
tax will make the Mauritius route less attractive for
FII investments. While this is a negative for foreign
funds, it would mean more revenue for the Indian government.
On an annual market turnover of about Rs 4,43,000 crore
from the FII segment last year, the government could have
collected about Rs 332 crore in taxes.
said, "The foreigners who are using Mauritius currently,
as a route to invest in India, they are going to see some
of the benefit taken away. Everyone is going to pay turnover
tax. People coming in from Mauritius were actually not
paying any long-term or short-term capital gains tax.
This is a kind of rise. The Mauritius
route becomes less attractive, which is good in the long
term. But, in the short term, for investors who are using
Mauritius in a legitimate way, it has raised some taxes."