The Stock exchanges and its brokers have requested the Finance Ministry that if the Securities Transaction Tax (STT) cannot be reduced, then it should not introduce any new tax, cess or surcharge.
This was the common refrain at the pre-budget meeting called by the Finance Ministry with senior officials of the stock exchanges. The meeting was attended by senior officials from BSE, NSE, USE, MCX SE, exchange members associations among others. The meeting was chaired by Dr Thomas Mathew, Joint Secretary in-charge of the Capital Market Division in the Finance Ministry.
Although officials were tight-lipped about the deliberation, it is learnt that exchanges requested the Finance Ministry to review the STT. They also advocated reduction in compliance cost of equity transaction. Revision would bring back the retail investors, they added.
The exchanges said that STT, which was introduced in 2004, is on equity only, thus giving an advantage to the commodity market. STT along with short term capital gain tax cut down the profit, which discourage the retail investor. STT is levied on sell and purchase of equity (both in cash and derivative market) besides equity oriented mutual fund. Rate of STT varies from 0.017 per cent to 0.125 per cent. The compliance cost consists of central and state taxes, brokerage and fee for exchange. Exchanges say that 55 per cent of total compliance cost are central and state taxes, 44 per cent is brokerage and other fee, while exchanges gets remaining one per cent.
With the reduction in compliance cost, it would be easy for the exchanges to incentivise the retail investors, added a source.