Stock broker association’s Budget 2019 wish list includes rationalisation of Securities Transaction Tax on exercise of options, exemption of long term capital gain on securities held for three years, exemption of interest earned by stock broker on funding done to its client from GST, commodities transaction tax(CTT) among others.
National Exchanges Members of India (ANMI) and Bombay Stock Exchange Brokers’ Forum in the budget memorandum submitted to Securities and Exchange Board of India to be submitted to the Finance Ministry said, “At present STT on delivery based settlement of futures contract is at the rate applicable on delivery based purchase / sale of equity shares. Hence, the additional STT charged on exercise of options needs revisit as it often leads to inefficient pricing at the time of settlement, hence, additional STT where option is exercised at the rate of 0.125 per cent needs to be done away with.”
“The interest earned by stock brokers on amount of funding done to its client is subject to GST. This is in contradiction to the notification issued by Ministry of Finance on June 28, 2017, which states that GST is not leviable / exempted on interest income. We recommend that this anomaly be set right at the earliest by exempting GST on interest charged to the client,” stock broker associations’ wish list said.
On exemption of long term capital gains on securities held for three years and more memorandum of stock broker associations said, “In India, the percentage of total population investing in stock exchange traded instruments is abysmally low. Hence, there is need to attract and incentivise the investors for holding the investment for long term so as to attract conventional investors who invest in gold, fixed return instruments or real estate. Hence, it is recommended that no tax should be levied on securities held for three years or more.”
Brokers also wish for reduction in STT for generating higher volume in market.
“There has been increase in the rate of STT, withdrawal of tax rebate and introduction of GST without subsuming of statutory levies applicable to stock exchange transactions. This has led to increase in the cost of transactions and we feel that reintroduction of Section 88E under Income Tax Act and reduction in STT will give desired fillip to the volume in market which in turn will increase government revenue,” the memorandum said.
Ravi Kumar, co-founder & CEO, of brokerage firm Upstox said,“Removal or even reduction of STT can give a good momentum to trading community in an era of low spreads. Encouraging long-term investments in the equity markets is also a prerogative for real capital formation, hence, the government should revisit its decision to implement 10 per cent long-term capital gains tax (LTCG) last year.”
“Centralised processes for lower compliance costs are also the need of the hour. Currently, there is a duplication of the submission of the documents one for Sebi (KRA) and another for RBI (CKYC) which serves the same purpose but increases the compliance process and time for the broker to register clients,” Kumar said.
Brokers also called for an alternate to dividend distribution tax. “The present form of adversarial taxation on dividend of around 20 per cent results into triple taxation of corporate earnings. The tax on the dividend should be in the form of equalisation to balance difference between corporate and personal tax. Hence, it is recommended that dividend distribution tax be withdrawn and the tax should be levied at the rate of 10 per cent on the recipient,” broker associations said.
Sanjit Prasad, MD & CEO, Indian Commodities Exchange (ICEX) feels commodity transaction tax (CTT)?has been a big impediment for the growth of commodity markets in India. The finance ministry should rationalise the CTT rates , he says.