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Day traders hope to see STT benefit restored

This article was posted on May 18, 2009 and is filed under Market News

MUMBAI: The broking community hopes that some of its issues of concern, particularly those relating to securities transaction tax (STT), would be
addressed by the Congress-led UPA government, which swept to power for the second consecutive term.

The Association of National Exchange Members of India (ANMI) has been approaching the government periodically, with a request to lower or abolish STT. According to ANMI, the tax hurts the lower segment of stock market participants like day traders, who operate on wafer-thin margins.

According to the current STT rate structure, a delivery-based cash market transaction is taxed at Rs 12,500 per Rs 1 crore, or 0.125%, levied on the buyer as well as the seller. “We are quite positive that the government will take up the STT issue in the next Budget. We expect it either to restore the benefit of STT or remove the tax completely. The minimum that we expect from the government is to restore the benefit of adjusting STT against business income,” said ANMI president (alternate) Anil Bagri.

STT was introduced in 2004 by the then finance minister P Chidambaram, which has turned out to be a very lucrative source of revenue for the government. The tax, however, has not gone down well with day traders, who had stayed away from the market in protest, resulting in a steep decline in volumes immediately after its introduction. “The cost of transaction for day traders has gone up considerably because of STT,” said Mr Bagri.

BR Bagri, CEO of Delhi-based jobber and arbitrageur BLB, feels the government will now be in a position to take constructive decisions more independently and so brokers can hope for some market-friendly policies, with reduction in STT rates being one of them.

Some brokers feel there are many other broader issues which are more important than micro issues like STT. “We would like the government to reduce STT but the main focus should be on achieving strong economic growth by continuing the reform process. The UPA government should revive the disinvestment process to raise funds for undertaking infrastructure projects,” said Angel Broking CMD Dinesh Thakkar.

source: Economictimes

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