The Hindu Business Line : Budget fails to excite market players

While the Budget's focus on agriculture and infrastructure development is welcome, the stock market players here said there is little in the Budget to excite the markets.

On the contrary, the increase in securities transaction tax (STT) and service tax would further push up the cost of share transaction to the investors.

Speaking to Business Line, Mr D. Balasundaram, Chairman of Coimbatore Capital Ltd and former President of Coimbatore Stock Exchange, said that the capital market players have been seeking withdrawal of STT on the ground that it was "regressive and counter-productive."

He said STT was not a tax on capital gains made but a tax on transaction and one has to pay it irrespective of profit or loss.

It was an "economically inefficient" levy and has been withdrawn in many countries.

The increase in STT would only widen the spread between the buy and sell quotes in the stock markets, he added.

Another sore point is the increase in the service tax by two percentage points, which is detrimental to the interest of the investors. He said already, investors are burdened with stamp duty on contracts, exchange charges, SEBI fee, STT, and service tax, and there are demands that STT and stamp duty be scrapped.

But instead of accepting these demands, the Budget proposals have only sought to push up further the cost involved in investment in shares.

Mr Balasundaram said the two positive Budget announcements related to providing greater depth to trading in Government securities and the development of a single unified market for corporate bonds, which would pave the way for retail participation in the debt market.

As there was no great expectation in the run-up to the Budget, the post-Budget disappointment also was less, he added.

Mr K. Annamalai, former President of Coimbatore Stock Exchange, termed as "totally illogical" the move to tax investors more on transaction despite loss in investment.

He added that instead of removing FBT, the Finance Minister has made it "complicated". The Minister was also "not clear" about capital gains tax and has not made any effort to simplify the tax structure.

Mr Annamalai also said that he did not find "any favourable treatment" to the capital market in the Budget.

However, he welcomed higher allocation to agriculture and infrastructure development.

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