The government on Monday discussed with stock exchanges various options to rationalise the securities transactions tax (STT). The finance ministry recently proposed to do away with or dilute STT, a levy that fetches the government around Rs 7,500 crore a year. The tax, levied on both buyers and sellers in delivery-based trades, was introduced in the 2004 Budget and over the years, the rate of this transaction tax has come down from 0.15% to 0.125%.
Securities and Exchange Board of India chairman UK Sinha recently said that rationalisation of STT is an issue that the government will have to decide.
The market players have been demanding withdrawal of STT ever since it was introduced in 2004 and claim its removal would help the market grow.
The cost of trading equity in the US and Europe is around Rs 500 on trades worth Rs 1 crore, while in India it is as high as Rs 1,300 including Rs 850 as STT.