Market boom in 2021, now visible in STT receipts

STT collection was on 2nd February 19,220 crore, as compared to the budget estimate of 12,500 crore, and revised 20,000 crore announced in the latest Union Budget, data accessed Mint is shown. This is an increase of about 48% over the corresponding period of the previous year, when the STT collection was 13,000 crores. STT collections during the period February and March of FY 2011 jumped 30.2% over a year ago 16,926 crore for the full year, but the revised estimates for FY22 mean that the last two months of the financial year saw a decline of 80%. Collections have increased during the pandemic as more retail investors have entered the market.

“Markets have been heated post-Covid. More retail investors are investing in the stock market. Moreover, there is positive sentiment around the economic recovery, which is aiding revenues higher than expected,” a government official said.

Queries sent to the spokesperson of the Central Board of Direct Taxes remained unanswered till press time.

STT is a direct tax payable on the value of taxable securities transactions carried out through a stock exchange. It is levied at 0.1% of the turnover for delivery-based equity transactions, while for intra-day transactions, the STT for purchase is zero, and for sales, it is 0.025% of the turnover.

According to capital market data provider Prime Database Group, the share of retail investors in all listed companies on the National Stock Exchange (NSE) soared to an all-time high of 7.32% at the end of December quarter, compared to 6.90% in the same period. 7.13% at the end of last year’s period and the September quarter.

However, the government has estimated the STT collection at flat 20,000 crore for FY23 as well. While the number is an underestimate, it highlights the government’s strategy of budget management, where higher-than-expected revenue acts as a buffer.

“Even if the market remains flat or grows 10-15% next year, the number of transactions in the market should increase significantly. Therefore, I am surprised that the government has kept the STT collection estimate flat for the next financial year,” said Rajesh H Gandhi, partner, Deloitte India.

At an industry event on Wednesday, Revenue Secretary Tarun Bajaj pointed to an increase in spending. “Despite the fact that the revenue buoyancy is so high, my fiscal deficit will be almost the same as stated in the budget estimate. Otherwise the fiscal deficit should have come down. This is not happening because the additional revenue that has come has been taken over by the additional expenditure,” Bajaj said.

According to the Securities and Exchange Board of India data, investors opened 10.2 million demat accounts in the three months ended December, the highest in any quarter.

“We do not expect the bull run to stop in FY13, especially given the sharp rebound in the Indian economy. “Investor confidence is increasing, and the momentum is expected to continue,” said Rakesh Nangia, Partner, Chairman, Nangia Anderson India.

In addition, the government plans to review the capital gains tax regime with a view to simplifying the investment trend, he said. “The participation of new investors is impressive in both the cash and derivatives sectors of the stock exchanges; Hence, STT collections are expected to be higher in FY13,” Nangia said.