HC directs CBDT to reply on STT
The Bombay High Court ordered the Central Board of Direct Taxes (CBDT) to provide clarity on the issue of securities transaction tax (STT) on physically-settled derivatives.
The court on Monday heard an appeal filed by brokers’ lobby Association of National Exchanges Members of India (Anmi) against the National Stock Exchange (NSE), after the bourse decided to levy STT at 0.1 per cent on derivative contracts of stocks that are physically settled.
This is 10 times the 0.01 per cent STT levied on stocks that are cash-settled. The next hearing will take place on Thursday.
The court has directed the CBDT to be present on Thursday and provide clarity on the issue, based on which it will set a date for final directions in the matter.
Anmi said that there is currently no provision in the Finance Act to tax derivative trades on physical delivery.
In a letter to Securities and Exchange Board of India dated July 17, Anmi had said the exchange should not commence physical delivery in the F&O segment, unless it issues a legal indemnity to its members from any future claims made by the Centre for non-collection of STT on delivery of F&O. It also noted there is currently no law to deal with gains/losses resulting from delivery transactions in the F&O segment.
In April, the NSE had issued a list of 46 stocks whose derivatives contracts result in physical delivery of shares. Derivatives contracts for these stocks were for the first time settled with physical delivery last month.
The court has directed CBDT to be present on Thursday and provide clarity on the matter