STT mop-up jumps 35% to Rs 7,103 cr

MUMBAI: In line with the upbeat mood in the stock market this year, collection of Securities Transaction Tax (STT), a tax levied on every transaction on the stock exchange, has witnessed a year-on-year increase of 35 % to Rs 7,103 crore. High STT figures, a tax that is paid by both the buyer and seller, is viewed as credible sign of stock market buoyancy.

STT collections dropped when the downturn in the market began last October. It fell by nearly 32% to Rs 4,455 crore by December last year. The effect of the slowdown continued to be visible even in the first quarter of the current year when it fell short on a year-on-year comparison by 25% to Rs 795 crore. Things started looking up in September last year when the collections moved up to Rs 3,207 crore (until September 5), a figure comparable to the corresponding period of the previous year. From then, the figure moved upwards in direct proportion to the rising Sensex, which on Monday closed at 17,169.

STT was a tax introduced in 2004-05 on every securities transaction at the rate of 0.125%. The buyer as well as the seller has to pay the tax. The objective of introducing the tax was to offset the revenue loss arising from removing long-term capital gain tax and the reduction of tax on short-term capital gains from 30% to 10%. The tax was opposed severely by brokers and investors.

The direct tax code, proposed to be introduced next fiscal, envisages a tax structure sans STT. It is sought to be removed with a view to provide a push to the stock market. The income-tax department has found this tax easy to administer and wants the administration to retain it. According to the department, since STT is a tax on a stock exchange transaction, it would be unwise to remove it at a time when the market is moving northwards.