``The Finance Minister has made only an announcement about the stamp duty exemption but no amendment has been proposed in the Finance Bill. Without the amendment, it cannot become a law and stamp duty will have to be paid by the investors,'' said a market source.

On the face of it, the Finance Bill 1999 has taken a giant leap forward in furthering the dematerialised environment by seeking to exempt scripless trading in debt instruments like bonds and debentures from stamp duty. ``However, the Finance Bill has not taken note of one crucial requirement to kick-start scripless trading in debt.

The proposed amendment to Section 8A ofthe Indian Stamp Act merely says that the transfer of beneficial ownership in debt securities would not attract stamp duty. Section 8A (C), which grants an exemption from duty on the process of dematerialisation itself has been left untouched. Now Section 8A (C) exempts the dematerialisation process in shares alone from stamp duty.

The Finance Bill should have included the term `debt securities' in this clause to facilitate the dematerialisation process in debt,'' said a leading tax expert.

According to him, if Section 8A (C) is left untouched, the very act of dematerialising one's debentures and bonds would constitute a transaction that would attract stamp duty. ``This could lead to scripless trading being still-born. The very cost of paying stamp duty on getting one's bonds and debentures dematerialised would be a serious disincentive for investors,'' he said. The stamp duty was a major obstacle in developing a thriving debt market.

If the stamp duty exemption materialises, the entire face of thesecondary corporate debt market will undergo a major change. This debt market, which has been devoid of any secondary market activity, will see buoyant growth on the back of a waiver of stamp duty on transfer of debt instruments in the demat form.

The Rs 30,000 crore corporate debt market was limping because of the levy of high stamp duty on transfer of a debt instrument. An investor currently needs to pay a one per cent interest -- which is even higher in the case of some states -- as stamp duty. In addition to this, there was the cost of brokerage and the cost of transfer of paper. As a result, the returns of the investor in the debt instrument are getting reduced. Once the debt instruments are dematerialised through a depository, the transaction costs will not only come down, it will be faster also.

This will prompt companies to take more interest in issuing debt instruments at attractive rates. As an analyst pointed out, if the Finance Minister fails to make a clear amendment in the laws, the wholeexercise will be wasted.