The Government has lowered the securities transaction tax (STT) to 0.1 per cent, a move that will bring down the costs of equity transactions.

“In order to reduce transaction costs in the capital markets, I propose reduction in the STT by 20 per cent (from 0.125 per cent to 0.1 per cent) on cash delivery transactions,” the Finance Minister, Mr Pranab Mukherjee, said during his presentation of Budget 2012-13.

STT, which was introduced in 2004, is levied on the sale and purchase of equities. According to estimates, STT accounts for 51 per cent of the transaction cost in stock markets.

Market players had raised the issue of STT abolition during a meeting with the officials of the capital market division of the Finance Ministry during the pre-Budget consultations.

During the meeting, representatives of stock exchanges, brokers’ associations and the Securities and Exchange Board of India (SEBI) had pointed out that the levy was hampering the growth of markets, without yielding significant revenue to the exchequer.

Stock markets did not seem to be much enthused by the cut in STT as the benchmark Sensex was trading down 206.78 points at 17,469.07.

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