Indicating the shrink in the trade volume over the past few years, stock market intermediary has urged that relaxation in the STT will help improve liquidity and push volumes to some extent as lower cost of transaction will increase participation of investors in trading. In the last two fiscals, the government has earned total STT revenues of around Rs 7,500 crore in 2010-11 and 7,400 crore in 2009-10.
However, one must remember that the stock market sentiment depends on a lot of factors, so any single reform may not bring radical shift in the market movement.
After the debacle in the UP election, the D-street along with other industries, expects major reforms in the industry and more market-friendly policies to bolster the sentiments of the market participants.
The Bombay Stock Exchange (BSE) registered member, BSE Brokers Forum has put forwards its grievances before the government, urging to wipe out STT and stamp duty on securities transactions, scrap TDS required for stock and commodity exchanges. They advocated for determining objectives to attain short-term gains.
Echoing for the same, Prakash Kacholia, managing director, Emkay Global Financial Services said, "We are hoping for some relaxation in STT rates which will help improve liquidity and push volumes to some extent."
Delhi-based BLB Group's chairman, BR Bagri said, "STT on non-speculative cash market transactions should be lowered while speculative derivative products, particularly options, can attract higher tax."
Currently, STT is levied at different rates - ranging between 0.025 per cent to 0.125 per cent, depending upon the type of products - cash (delivery or non-delivery based) and F&O.
Securities Transaction Tax (STT) was introduced for the first time in the 2004-05 budget by the then finance minister P Chidambaram.