Calcutta, July 9: The imposition of a transaction tax has boomeranged on the people who actually demanded it. Foreign institutional investors, domestic financial institutions and big brokers had floated the idea of scrapping the long-term capital gains tax and replacing it with a turnover tax.

Now that finance minister P. Chidambaram has granted their wish, many are crying foul.

The first bone of contention is that they never imagined that the levy would be extended to the debt market and futures and options deals. In both these segments, the profit margin is extremely thin and a levy of 15 basis point tax on that would make the whole profit-loss equation go haywire.

They are baffled because they had expected a lower 10 basis point levy instead of the 15 basis points as declared by the finance minister.

However, all this confusion over transaction tax has given rise to two schools of thought within the country. One feels that the measure announced in the Union budget would bring serious investment into the market and would discourage speculative activities. The other feels it would adversely affect all traders and impact the liquidity position.

“The message is clear. This move is to abolish speculative trading and to encourage genuine long-term investment,” said Rajiv Bajaj, managing director, Bajaj Capitals.

However, he added that debt market and futures and options market should be kept outside the purview of this tax.

Chandravadan Desai of CD Equisearch said that this move would not affect the delivery-based transactions but may impact the liquidity in the markets since it would be a dampener on intra-day trading.