In a move to increase the depth of the capital markets, members of the Securities and Exchange Board of India (SEBI) have recommended a phased reduction of the securities transaction tax (STT). The recommendation has come in the wake of discussions with finance minister Pranab Mukherjee. To increase retail investors’ participation by lowering STT is considered important in the capital markets ast it reduces the overall transaction costs.
At these crucial times when markets have started reviving, it is a high time to slash the STT to propel investment from retail investors. STT is a tax slapped on the sale and purchase of securities, including shares, derivatives or units of mutual funds traded on a recognised stock exchange. As of now, the applicable STT rate is 0.125% of the total volume of the transaction.
Recommendation by the members are on the back of logic that says a phased reduction or phase-out of the tax might not hamper the government’s kitty considerably since it already charges short-term and long-term capital gains tax on every transactions.