STT mop-up rises 14% in spite of sell- off

A rebound in the market coupled with higher retail participation has boosted securities transaction tax (STT) collection to ~2,568 crore, up 14 per cent in the first quarter of financial year 2020-21.

According to an official with the income tax (I-T) department, despite a slowdown in the economy because of the Covid-19 pandemic, which impacted both personal income tax and advance tax collections of the first quarter, the mop up from STT showed double-digit growth.

The department collected ~2,568 crore against ~2,262 crore in the corresponding period a year ago. The government expects to collect ~13,000 crore in the current fiscal year from the STT kitty.

With this growth, the tax department believes that the target is achievable if market conditions stay stable.

Experts attributed the higher collection to the volatility in the futures and options segment due to the global pandemic.

“While trading volumes have been shrinking and F&O trading has seen a massive fall, STT is payable on both the legs of buy and sell in case of cash segment and on the sell leg of F&O. So, when there is a massive exit by any class of investors like foreign portfolio investors, STT is still payable,” said Sunil Gidwani, partner (markets) of Nangia Andersen LLP.

Market performance across the globe has been gloomy. This has been reflected in the frequent crashes faced by the stock market. The Indian market saw sharp selloff in April and May. This had pushed Nifty and Sensex into bear territory several times. Even the stimulus package announced by the government, in five tranches, did not help.

“Market is now rebounding from the current Covid-19 effect. But the slowdown persists despite all the efforts and measures by the Reserve Bank of India (RBI) and concerned ministries, said a market expert.

Meanwhile, the tax payouts from dividend distribution tax (DDT) has plummeted 75 per cent from ~3,220 crore to ~809 crore following removal in the equity segment. “This is on expected lines because of change in the tax structure from April 1 where dividend will now be taxed at the hands of investors. The collection of ~800 crore was on account of spillover from last fiscal year due to extension of date to deposit tax,” said a tax official.