With the stock market lacklustre, the Government's tax collections from the securities market have plunged.
Securities transaction tax (STT) collections have fell by over 26 per cent during April-December 2011, government data show. The STT is levied on all sale or purchase transactions involving equities, equity-oriented mutual fund units, and futures and options.
This downward trend in STT is being seen at a time when discussions are on to rationalise this tax. The stock market analysts feel that the STT increases transaction costs and deters investors. Stock brokers say that on an average brokerage of 10 paise per Rs 100 for an institutional investor, STT constitutes over 50 per cent of the total transaction cost.
With the Sensex down by nearly 4,000 points during April-December, trading volumes have been thin, affecting tax collections.
The Finance Ministry has set a target of Rs 7,500 crore from STT in 2011-12.
On the other hand, collections from personal income tax have picked up. Corporate tax collections also grew by over 12 per cent.
“The overall growth rate is just satisfactory, but still it is difficult to say that we will be able to achieve the target of direct taxes,” a senior Government official said. Gross tax collections during April-December were up 14.54 per cent, while net collections registered a growth of 8.36 per cent.
Shortfall feared
The target for direct tax collection is Rs 5.33-lakh crore for the current fiscal. However, with a slowdown in growth and corporate margins under pressure, there is a feeling that direct tax collections may miss the target by Rs 20,000 crore. There are apprehensions in some circles that the actual shortfall may go up to as much as Rs 40,000 crore.