Some 60-65 brokers--both from the Bombay Stock Exchange and the National Stock Exchange--are surrendering their memberships in anticipation of not being able to meet their liabilities on account of the turnover tax by March 31.

More brokers are expected to hand in their cards as the March 31 deadline for the broking community to pay up at least 50 per cent of their turnover tax dues or face suspension draws closer.

The Securities and Exchange Board of India had in a circular to brokers asked them to pay at least 50 per cent of their turnover tax due by March 31, 2003.

Further, brokers were also supposed to submit an undertaking to Sebi on the exact amount of liability pending and a tentative schedule of payment.

Sebi has already indicated that brokers who are unable to pay up at least 50 per cent of their turnover tax dues by March 31, 2003, face the prospect of their terminals being switched off.

Interestingly, brokers themselves feel that it is no use waiting for the deadline since the value of membership cards has dropped significantly and, in many cases, is even less than their dues to the exchanges.

At present a BSE card is valued at around Rs 65 lakh (Rs 6.5 million). Declining trading volumes and a falling market have resulted in a situation where brokers have no way of generating revenues, and no way  of paying their dues.

On a conservative estimate put out by brokers themselves, nearly 20 per cent of BSE members and 50 per cent of NSE members face the prospect of losing their broking licences. Approximately 400 active members are registered with the BSE and another 700-odd at the NSE.

Incidentally, the development will also have an impact on the derivatives market as a large number of NSE members also operate in the futures and options segment. They were allowed membership in the derivatives segment ahead of the Sebi order, which stipulated that membership on the derivatives segment would not be allowed unless these brokers cleared their turnover tax dues.

Taxing time

• More brokers are expected to hand in their cards as the March 31 deadline nears.
• Sebi has indicated that brokers unable to pay at least 50 per cent of their tax due will have their terminals shut.
• Brokers feel that it is no use waiting for the deadline since the value of membership cards has dropped significantly and, in many cases, is even less than their dues to the exchanges.
• At present a BSE card is valued at around Rs 65 lakh.