The government has authorized the exchanges to collect stamp duty and distribute it to the states as per the domicile of the investors. The exchanges, however, have welcomed the move.
The government has proposed a new model to collect stamp duty from equity traders through the Union Budget presented on February 1.
The government has authorized the exchanges to collect stamp duty and distribute it to the states as per the domicile of the investors. While brokers were hoping for the abolishment of the securities transaction tax, the government has added a stamp duty on equity transactions instead.
Uttam Bagri, Chairman of the country’s largest brokers forum, the Bombay Stock Exchange Brokers forum, told Moneycontrol, "With 100 percent demat, why should stamp duty be applicable in the first place? Currently, there is practically no difference between Stamp Duty and STT. The two levies will simply increase cost of transaction for the investors, creating scope for future friction. Stamp Duty on securities transactions should be abolished and states can simply be given a share of the STT."
However, the exchanges have welcomed the move.
Metropolitan Stock Exchange Chief Financial officer Kunal Sanghavi told Moneycontrol, “The decision to levy Stamp Duty on financial securities transactions only on one instrument relating to one transaction is a very welcome step for rationalising the transaction costs for investors. The duty will now be collected at one place through the exchanges and will be shared seamlessly between the states on the basis of the domicile of the buyer.
"This brings in a lot of comfort, not only in terms of bringing down the cascading effect of the duty but also in terms of ease of compliance. This will end the ambiguity among the broking community where clarity was missing on the states in which stamp duty has to be deposited and which states rates to be applied. While we await details, it will also ease things operationally for member brokers and the process will become seamless, similar to STT.”
Another exchange official, on conditions of anonymity, told Moneycontrol, “The government has given a welcome direction through the budget speech. Currently, brokers voluntarily collect stamp duty from investors. In this scenario, investors skip these payments for a longer period. With the exchanges having their customer's details, they can easily credit the Duty to the states as per domicile. Certainly compliance will increase, and leaks will be stopped."
Most of the states collect stamp duty, with Maharashtra being the highest stamp duty collector. However, in some states, the stamp duty on equity trading is exempted, but with this move, the collection of the stamp duty by the exchanges may see uniform compliance.The Brokers had called for a uniform stamp duty across all states. President of the Association of National Exchange Member of India Rajesh Baheti told Moneycontrol “Rather than abolish stamp duty as the STT is already levied on all transactions, the government has defacto imposed a state STT in the guise of stamp duty. ANMI wants the abolition of the stamp duty as states are already a recipient of their share from the STT pool”.Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.