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To give a fillip to the sagging stock market, the Government is considering a cut in the Securities Transaction Tax (STT). The Finance Ministry, too, is considering a rationalised and uniform stamp duty on securities transactions.
News about the reduction and rationalisation of duty and taxes cheered the market.
The BSE benchmark index Sensex recovered 250 points from the day's low to close at 16,051.10, but it was still 110.96 points lower than Friday's closing.
“We are seriously looking into the proposal (reducing STT). This can be done outside the Budget,” a senior Finance Ministry official said.
There is a view in the Government about doing away with this tax as it has not generated much revenue. During April-August this fiscal, the Government mobilised Rs 2,223 crore from STT, almost 10 per cent less than last fiscal (2010-11).
The STT is levied on sale and/or purchase of shares, equity-oriented mutual funds and futures and options in securities. The tax was introduced by Mr P. Chidambaram in the 2004-05 Budget.
The proposal to reduce or remove the STT came up during a meeting between the Finance Ministry and stock exchanges.
It was said that this tax constituted a major component of the transaction cost. Due to the high cost and to make trading more attractive, there was need to reduce or remove the tax, the exchanges are believed to have said in the meeting.
Meanwhile, the Finance Ministry is preparing to present a proposal before the Cabinet for rationalising stamp duty. This also involves cutting the rate in some States.
“Two departments of the Ministry, Economic Affairs (responsible for development of capital market) and Revenue (responsible for taxation) have finalised various provisions. Now, the Finance Minister, Mr Pranab Mukherjee, will take a final call and then the proposal will be taken to the Cabinet,” a senior official said.
Since stamp duty is a State subject, discussions are also underway with States.
As the rates vary from State to State, the effort is to define a uniform rate and persuade the States to fix it accordingly, the sources added.
Maharashtra tops in stamp duty collection with 42 per cent of the total inflows.
It levies at the rate of 0.002 per cent on non-delivery-based trades and 0.01 per cent on delivery-based.
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