'Rather than abolishing stamp duty as STT is already levied on all transactions, the government has de-facto imposed a state STT in the guise of stamp duty.'
Illustration: Uttam Ghosh/Rediff.com
The government has introduced a new process for levying stamp duty on shares.
The same will now be collected at the stock exchange in a uniform manner.
Earlier, different policies were followed pertaining to collection, with stamp duty rates varying across states.
Interim Finance Minister Piyush Goyal’s move was seen bringing in some ‘operational convenience’, according to market experts.
“Our government had promised last year that we would carry out reforms in stamp duty levied and collected, on financial securities transactions.
"I am proposing, therefore, through the Finance Bill, necessary amendments in this regard.
"The amendments proposed will usher in a very streamlined system,” Goyal said during the budget speech.
He added tax collection is at the bourse level. States would get a share depending on where the buying investor is located.
“Stamp duties will be levied on one instrument relating to one transaction and gets collected only at one place, through the stock exchange.
"The duty so collected will be shared with all the state governments, seamlessly, on the basis of domicile of the buying client,” he said.
Brokers had earlier asked for the abolition of stamp duty.
They had submitted a representation including abolition of stamp duty and rationalisation of securities transaction tax (STT).
The Association of National Exchanges Members of India (Anmi) and the Bombay Stock Exchange Brokers Forum had submitted a memorandum to the Securities and Exchange Board of India (Sebi) chairman on these and other matters; requesting tax rationalisation to attract more investors.
“In India, the percentage of total population investing in stock exchange-traded instruments is abysmally low.
"Hence, there is a need to attract and incentivise investors for holding the investment for a longer term, so as to attract conventional investors who invest in gold, fixed return instruments or real estate,” the letter, reported earlier, stated.
It had also asked for withdrawal of dividend distribution tax, and exemptions on long term capital gains tax for securities held more than 3 years, among others.
“With 100 per cent demat, why should stamp duty be applicable in the first place?
"Currently, there is practically no difference between Stamp Duty and STT. Two levies will simply increase cost of transaction for investors and create scope for future friction,” said Uttam Bagri, chairman of the Bombay Stock Exchange Brokers Forum.
“Rather than abolishing stamp duty as STT is already levied on all transactions, the (government) has de-facto imposed a state STT in the guise of stamp duty,” said Rajesh Baheti, president of Anmi.