With the Union Budget just about two months away, brokers have once again knocked on the government’s doors asking it to look into the high cost of trading. Brokers have pitched for a reduction in STT?securities transaction tax?while suggesting that it be extended to all asset classes. They have also reiterated their demand for a uniform stamp duty across the country.
Recently, representatives of the Association of National Exchanges Members of India (ANMI) met with the finance ministry officials and made a presentation on how STT could be lowered without the government exchequer taking any hit. ANMI is the umbrella body of brokers from BSE and NSE.
?We tried to impress upon the government that any reduction in STT will not lead to any loss to the exchequer,? said Naresh Maheshwari, president, ANMI. ?The turnover will increase if STT is lowered. We cited the case of equity options where the manner in which STT was levied was tweaked and the volumes went up exponentially,? he explained.
The issue of STT has been the subject of much debate especially in a bear market with the change in taxation rules impacting margins especially of jobbers and arbitrageurs. Brokers have been for long demanding a rollback or at least a reduction in the STT. Most jobbers and arbitrageurs have shut shop in the last couple of years citing low or almost nil margins.
Brokers also highlighted the fact that STT was levied only on the equities giving an undue advantage to other asset classes, including commodities. It has been suggested that such transaction taxes should be extended to commodities as well so that there is a levelplaying field.
?Taxation shouldn’t be a criteria based on which an investor decides on his investment avenue,? said another broker privy to the discussions. ?Look at the shift in volumes from equity to commodity futures. While the global rally (in commodities) is also a trigger, there is no denying the fact that margins are higher in the commodity arena that attracts more investors. It distorts the market,? he said. The daily volume in commodities has nearly doubled in the last one year while that of equity futures has fallen by around 30%.
ANMI is not alone in highlighting the issue of high trading costs in the equity market.Earlier, the chairman of the Securities and Exchange Board of India, UK Sinha, has also endorsed such concerns of the broking community.