BSE seeks clarity on tax on convertible securities

Top bourse BSE has asked the government to provide clarity on whether securities transaction tax (STT) is applicable on convertible securities like preference shares and warrants. The exchange, which made these submissions to the Finance Ministry ahead of the Budget, has said the current taxation norms do not provide clarity on the issue. "It is not clear whether the STT should be levied on trading of such convertible securities or on conversion of such securities," it said.

Securities transactions which involve purchase or sale of an equity share in a company or a derivative or a unit of an equity oriented fund (or a business trust) on a recognised stock exchange are taxable. Taxable securities include sale of unlisted equity shares under an offer for sale to the public through an initial public offer and where such shares are subsequently listed on a recognised stock exchange. BSE has also asked for a uniform stamp duty policy, even if the duty is collected by the states and not the Centre.

Currently, stamp duty rates and processes differ across states. While some states charge stamp duty on the basis of where the trades get executed, others charge on the basis of where the orders are placed, which sometimes leads to double taxation. There is also a discrepancy in the securities that are eligible for stamp duty collection, resulting in a lot of confusion and arbitrage across states, BSE said.