| Twilight zone
Calcutta, Feb. 2: This may well be the last nail in the coffin for hundreds of brokers of Calcutta Stock Exchange and the 125-year old bourse itself. Turnover tax liabilities of some 1,100 brokers of the exchange are being calculated, and it seems that their total dues would exceed Rs 100 crore.
Turnover tax is a statutory liability. If the brokers do not pay up, they would, at the least, be thrown out of the stock markets. The looming liability sent jitters across Lyons Range last week as the exchange officials gave final touches to their calculations.
The exchange is calculating the tax for its members on the basis of instructions obtained from the Securities and Exchange Board of India (Sebi) — the market regulator. The tax has been levied with effect from the beginning of fiscal 1991-92.
For the first two years — 1991-92 and 1992-93 — the exchange does not have proper data. So it has had to take the average of the next two years — 1993-94 and 1994-95 — for the first two years.
Brokers feel this led to a significant increase in their liabilities as turnover in 1993-95 was significantly higher than the two preceding years. The bourse, however, does not have a choice. It is simply following Sebi’s guidelines.
Sebi has levied different rates for transactions that result in delivery of shares and those that are squared off within one trading session — or ‘jobbing’ in stock market’s parlance.
Brokers are required to pay 0.01 per cent as tax for transactions leading to delivery — or Rs 1,000 for a transaction of Rs 1 crore. Assuming shares worth Rs 1 crore was bought, held over, and sold at the same price, one would have to pay Rs 2,000 as tax.
For trades squared off within one trading session (jobbing), the tax is 0.005 per cent of the sale value. Assuming shares worth Rs 1 crore were bought and sold at the same price within the same trading session, the total tax is Rs 500.
Since the exchange does not have trade data for 1991-92 and 1992-93, turnover for the years will be taxed at 0.01 per cent — or the rate applicable for transactions leading to delivery of shares. Exchange officials explained this too was done in accordance with Sebi’s directives.
Hundreds of brokers are in no position to pay the dues and face an uncertain future. Some — particularly those that thrived on ‘jobbing’ — say their liabilities are even greater than they had earned. There are some 400 active brokers in the city now. Turnover tax dues may force at least half of them out of business within a couple of months.