New Delhi: Foreign investors have welcomed the move to impose a turnover tax. But, they want the tax on the seller, and not buyer''s side. The turnover tax is a hotly debated issue among all market participants and opinion is divided over whether it will be a positive step in the long term. One opinion says that it will, instead, be regressive and cause volumes to dry up. But, there''s one common ground - the tax should be at the point of sale.

Punita Kumar Sinha, managing director, Oppenheimer Asset Management, says, "The only negative is that it has been put on the buyers rather than sellers, whereas in most markets it is at the point of selling. I do not understand why it should be put in at the point of buying, because when foreign investors are bringing in money into India, they should not put in a tax at the point of entry. It is only when they have decided to sell, and realised a return, if there is a tax employed at that time, it is more fair and feasible. Why penalise someone at the point of entry."

The tax will make the Mauritius route less attractive for FII investments. While this is a negative for foreign funds, it would mean more revenue for the Indian government. On an annual market turnover of about Rs 4,43,000 crore from the FII segment last year, the government could have collected about Rs 332 crore in taxes.

Sinha said, "The foreigners who are using Mauritius currently, as a route to invest in India, they are going to see some of the benefit taken away. Everyone is going to pay turnover tax. People coming in from Mauritius were actually not paying any long-term or short-term capital gains tax. This is a kind of rise. The Mauritius route becomes less attractive, which is good in the long term. But, in the short term, for investors who are using Mauritius in a legitimate way, it has raised some taxes."