Budget 2012: FM slams the door on investors

All investors had their eyes set on whether Finance Minister would fulfill their demands or not. Unfortunately, the only demand by the investing community of removal of STT (Securities Transaction Tax which is the tax on trading stocks) has not been met be the finance minister.

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Against the demand of a complete removal of STT, the finance minister has announced a reduction of only 20 percent and that too only on cash delivery transactions. New STT stands at 0.1 percent for the cash market and continues to remain at the earlier levels of 0.17 percent for derivative transaction.

Despite the parliamentary panel suggesting a removal of the duty and the members of the stock exchanges requesting the removal of the tax, Pranab Mukherjee has only passed on crumbs to investors.

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Poor market environment and lower volume has affected government’s collection from STT. Tax collection has come down from Rs 7,500 crore in 2011-12 to an expectation of Rs 5,500 crore in the current year.

Cash markets account for less than 8 percent of all stock exchange volumes, of this cash delivery is only 35 percent. This means the benefit of the reduction of 20 percent on STT by the finance minister will be available to only 2.5 percent of the volume in the exchanges.