Budget 2019: Nirmala Sitharaman’s STT cut may not cheer markets much; here’s what experts say

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Published: July 5, 2019 3:25:34 PM

Union Budget 2019 India: Even as Finance Minister Nirmala Sitharaman reduced securities and transaction tax (STT), market analysts don’t seem much enthused since the cut is only restricted to trading in options.

Budget 2019, Union Budget 2019 India, Budget 2019 India, Budget 2019-20Union Budget 2019 India: Against expectations, STT continues to remain the biggest obstacle to raise volumes on the bourses, the experts said.

Union Budget 2019 India: Even as Finance Minister Nirmala Sitharaman reduced securities and transaction tax (STT), market analysts don’t seem much enthused since the cut is only restricted to trading in options. Against expectations, STT continues to remain the biggest obstacle to raise volumes on the bourses, the experts said. “I propose to give relief in levy of Securities Transaction Tax (STT) by restricting it only to the difference between settlement and strike price in case of exercise of options,” Finance Minister Nirmala said in the budget speech.

“Union Budget 2019 was largely a non-event, especially from a financial markets perspective. The reforms we expected on STT did not come through. STT continues to remain the largest deterrent in price discovery, jobbers, and short term day traders make the markets deeper and significantly reduce impact costs. STT is a hindrance to this populous making it harder for them to thrive,” Nikhil Kamath, Co-Founder & Chief Investment Officer, Zerodha said.

STT was introduced in the 2004 Union Budget and came into effect from 1 October 2004. The rate of STT differs based on the type of security traded and whether the transaction is a purchase or a sale.

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“ANMI would like to thank the Finance Minister for restricting the STT to the difference between the settlement and strike price of options.  We would request her to also consider reintroduction of erstwhile Section 88E. so that professional share traders are not taxed twice once at STT stage and then on their incomes at the maximum marginal rate.  This will also give the desired filip to the volumes in share markets increasing government revenue,” Vijay Bhushan, President, ANMI, said. However, the Finance Minister Nirmala Sitharaman announced welcome steps to deepen the long term bond market, he added.

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