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  3. SEBI to conduct a review of possible positive impact of removing STT

SEBI to conduct a review of possible positive impact of removing STT

07 Oct 2011 Evaluate
The capital market watchdog, Securities and Exchange Board of India (SEBI) is examining the possible impact on the stock market turnover from a possibility of removing securities transaction tax (STT). The STT is charged on all sales and purchase in the equity market.

The capital market, regulator is in favor of complete or phased withdrawal of the levy and it has the view that such move will positively affect the market profits.

The capital market regulator is reviewing the estimated gains in term of the overall stock market profit volumes as also for the savings that investors and traders may get form the removal o the STT, which was introduced in October 2004, 05 by the then Finance Minister P Chidamabram as part a policy to rationalize the tax structure for the capital market. The SEBI will submit its report’s findings to the ministry of finance at the time of SEBI’s submissions for the next budget proposals.

It is understood that the ministry of finance’s capital market division is in favor of examining the STT framework with a view of either scrapping it altogether or in phased manner, however, the final decision on the issue is likely to be taken by the revenue department of finance ministry, as the recommendation would lead of loss of tax revenues for the government. It is estimated that the government collected around Rs 7,500 crore in last financial year and around Rs 7,400 crore in the 20090-10.

The capital market players has been demanding the removal of the STT since the time of introduction, they had argued that the withdrawal of such tax would help the market to grow further. Even the high level expert committee on the potential of Mumbai as an international finance centre also had recommended to scrapping the STT, by saying it was a dampener for the international investors’ interest in Indian capital markets.

However, the charging rates have decline significantly. At the time of the introduction of STT, the rates were 0.15%, which is reduced to 0.125% to 0.025% depending on the different market segments cash dealings, intra-day trade and derivatives markets.

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