The pressure on the removal of the securities transaction tax (STT) applied on share transactions is getting intensified. After the regulator, Securities & Exchange Board of India (Sebi) making a case for this, the Association of National Exchange Members of India (ANMI), representing around 800 stock brokers across the country has approached ministry of finance (MoF), requesting for a removal of the securities transaction tax (STT) or reducing it from the current level of 0.125%.
Arguing that no other jurisdiction in the world has a taxation system where tax has been imposed on the securities transacted, senior executives of ANMI said that STT in India is resulting in higher cost of transaction making the Indian market uncompetitive among the emerging markets.
STT, which was introduced in 2004, is the tax imposed on the sale or purchase of shares, derivative instruments or units of mutual funds in the securities market. EMC Palaniappan, president?ANMI, said, ?The cost of transaction for both retail and institutional investors has shot up drastically since the STT regime came in to place. Following this we are losing business to other markets which is evident from the sharp surge in volume in SGX Nifty and Dubai Stock Exchange?.
?We can?t make Mumbai a international financial hub if we make ourselves uncompetitive compared to other markets through such taxation regime?, said Anil Bagri, alternate president, ANMI. The market regulator Securities and Exchange Board of India (Sebi) is in favour of a gradual reduction of STT and has suggested it to the MoF as part of its measures to develop the domestic capital market. According to industry sources, instead of doing away with tax on securities transacted, the government is considering to replace STT with an alternative tax mechanism that will help in reducing the cost of transaction in the securities market.
Apart from abolition or reduction in STT, ANMI has also requested the government for the rationalization of stamp duty charges. Currently, stamp duty is charged by specific state governments and varies from state to state. Members of ANMI have asked for a uniform computation methodology to be followed by state governments and base it on the investors address to avoid double taxation.