Transaction tax may be raised

Finance Minister P Chidambaram's target of mopping up around Rs 2,000 crore from the securities transaction tax (STT) in the capital market seems to have been far too ambitious.

The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) are believed to have collected approximately Rs 380 crore as STT in the last four months.

With collections way short of the target, there is talk of the STT rates being hiked in the forthcoming Budget.

Sources said STT on delivery-based trades is expected to be hiked from the existing 0.15 paise on every Rs 100 to 0.30 for every Rs 100 split equally between the buyer and the seller.

On non-delivery trades, the STT is expected to go up from 0.015 per cent to 0.025 per cent, while in the futures and option segment, the rates are expected to go up from 10 paise on every Rs 1,000 worth trade to 0.15 paise.

According to sources, the BSE collected Rs 21 crore as STT in October, translating into collections of approximately Rs 1 crore a day. The STT was introduced on October 1, 2004.

In the subsequent months, with a surge in volumes, this collection has gone up to approximately Rs 1.6 crore per day, which accounts to approximately Rs 28 crore per month.

The highest collection was in the month of December at approximately Rs 35 crore with the volumes on the BSE at Rs 48,914 crore and Rs 1,15,527 crore on the NSE.

The NSE is believed to have collected twice the amount collected by the Bombay Stock Exchange, going by the turnover and volumes on the NSE's futures and option segment, sources added.

When contacted, a senior BSE official confirmed that the exchange has collected STT at approximately Rs 1.6 crore daily except for the first month, when it was approximately Rs 1 crore a day. He, however, refused to divulge any further details.

NSE officials refused to comment on the issue.

If the current trend continues, the government may raise Rs 1,100-1,200 crore in the current financial year.

But brokers said the government's move to introduce STT has had a positive impact in that a transparent tax regime has been able to attract a new breed of foreign institutional investors, and enthused the existing portfolio investors to trade much more aggressively in Indian securities.

Delivery-based traded volumes had hit a all time high of 56 per cent of the total traded volumes of the BSE recently, indicating a higher amount of genuine trades.