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The finance minister left the securities transaction tax unchanged on cash market transactions but cut the same on equity future to Rs 10 per lakh from Rs 17 per lakh earlier, which market participants said would have only marginal benefit.
"The cut in STT will have minimal benefit for the markets," said A K Prabhakar, senior VP (Research), Anand Rathi Financial Services.
In his budget speech, the STT has been reduced by 41% on equity futures from 0.017% to 0.01%. This means, traders have to now pay Rs 10 for every Rs 1 lakh of transaction instead of Rs 17 per lakh earlier.
STT was introduced in India in 2004-05 by P Chidambaram in place of long term capital gains tax which was made 0 from 15%. STT is payable whether you buy or sell a share and gets added to the price during the transaction itself.
Investors has to pay Rs 125 per lakh on buying and selling of shares on cash market. For non-delivery on cash markets STT is levied at the rate of Rs 25 per lakh.
Though the move is expected to bring cheer to many speculators, the broader investment community was disappointed as they were expecting abolition or a cut on STT in the cash market to encourage more delivery based trades.
Economic Times, New Delhi, 28-02-2013