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Turnover tax seen as a blip

Our Bureau

Mumbai , July 8

THE mood was one of cautious optimism kind. Optimistic because it is being termed as a Budget with a face and cautious because the `turnover tax' proposal is being looked on as a blip. "This is clearly a signal that reforms will continue. All the measures from the increase in FDI, to the indicated fiscal deficit are all definite positives. The decision to integrate the commodities and securities market is a good one, as the market will become more disciplined which in turn will build up investor confidence. The market has, however, reacted to the measure on turnover tax. There is no denying that that this move will effect turnover and liquidity of the market. It will keep arbitragers and day traders away for they will have to factor in that cost too," Mr M. Narain S.A, Executive Director, Kotak Securities, said.

On his part, Mr Vallabh Bhansali, Chairman, Enam Securities, termed it as a brilliant and political Budget. "The Budget is a political statement on the direction of reform. It has shown what reforms with a human face really stand for. This is evident that on the one hand, you have increase in FDI in core sectors while spending more money on the agricultural sector. The rural economy needed to get a boost, for long-term development. The rest of the issues, in particular, turnover tax are subject to evolution, review and clarification," he reasoned.

Mr Paresh Khandwala, CMD, Khandwala Securities, said, "It is a populist Budget, given that 80 per cent of the Budget is pro-agriculture. While there is concern over the turnover tax issue, one should not take an overlean view. We will continue to attract FII investment in the medium and long term where fundamentals will prevail upon. One needs to read the fine print and build an opinion," he added.

While conceding that the Budget is positive, Mr Nilesh Shah, CEO-broking, Edelweiss Capital, said that there is some confusion in the market over the turnover tax issue. "Liquidity will be impacted in the short term. We are talking of around Rs 5,000 crore revenue. However, there is no denying that the Budget has more positives than negatives," he said.

There is a general perception that the market is likely to open with a downward gap, until there is some more clarity on the issue.

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