The Hindu Business Line : Transaction tax concerns will be addressed: Chidambaram

THE Finance Minister, Mr P. Chidambaram, clearly indicated on Saturday that there would be changes in the securities transaction tax (STT) to address the concerns of the investing community. The Union Budget had proposed to levy a 0.15 per cent tax on transaction of securities traded in a recognised stock exchange.

"Your point (that STT is an hefty levy for day traders) is well taken. Your concerns would be addressed," Mr Chidambaram said in response to a submission made by an investor at an investor camp organised by business channel CNBC-TV 18 here. The Finance Minister is likely to announce the modifications during his reply to the Budget debate on Monday.

The Finance Minister said that the revenues from STT would be lesser than 1 per cent of the total tax revenues targeted by the Central Government.

An investor suggested to the Finance Minister that the STT should be imposed on the sellers of securities rather than the buyers.

Mr Chidambaram also assured investors that the United Progressive Alliance (UPA) Government would make public all action taken against vanishing companies.

"It (Government action on vanishing companies) has taken longer than what I would have liked it to be. It was I who directed investigation against vanishing companies in 1996. Action has been taken and action is being taken. The results of action would be made public soon," he said.

He also made it clear that the Government is committed to help revive regional stock exchanges (RSEs). Admitting that the growth of BSE and NSE has cast a cloud over RSEs, he said that the Government's intention was to "allow and help as many RSEs" to thrive in the business environment.

"When an alternative trading platform for small and medium enterprises (SMEs) to raise equity and debt from the capital market is created (Budget proposal), it will help revive RSEs," he said.

The Finance Minister underscored the need to further broadbase and deepen the capital markets. "This will happen only when a large number of investors participate. Ultimately the growth of the capital market depends not only on the quality of the regulator, but also on how well informed the investors are. It is important for investors to understand risk and returns. Shareholder activism is necessary to keep managements on their toes," he said.

The Finance Minister hoped for a healthy gross domestic product (GDP) growth during the current fiscal. "A number of agencies have predicted growth rates in GDP between 6.2-7.4 per cent for the current year. Even the Centre for Monitoring Indian Economy has predicted 6.3 per cent for this year on the back of 8.2 per cent growth achieved last year. I think 6.3 per cent on the back of 8.2 per cent is equally impressive," he said.

The Securities and Exchange Board of India (SEBI) Chairman, Mr G. N. Bajpai, said that India is a long-term growth story and that its micro-fundamentals are good if one were to go by the results that were flowing into the capital market.

"You as investors should take a call not for day trading but for medium and long term investments. Your participation in the capital market should be based on informed decisions. Do not get panicked by any May 14 or May 18 incidents," Mr Bajpai told the investors attending the investor camp.

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