Clarify tax rate on transactions of securities, high court asks CBDT
MUMBAI: Acting on a petition filed by members of the National Stock Exchange Limited (NSEL), the Bombay Stock Exchange (BSE) and other exchanges, the Bombay high court on Thursday directed the Central Board of Direct Taxes (CBDT) to clarify the rate at which securities transactions tax (STT) is to be collected by them.
A division bench of Justice Bhushan Gavai and Justice Makrand Karnik felt it necessary that the CBDT clarifies the tax rate to save trading members from any unforeseen future liabilities, especially as they are not legally liable to collect STT.
The HC has posted the petition filed by Association of National Exchanges Members of India on August 28 for further hearing. The association approached the HC after the NSEL issued a circular on July 17, instructing them to collect 0.10% of the derivatives contract amounts towards STT. Their counsel, Dr Birendra Saraf, pointed out that the rate was fixed by NSEL in view of a circular issued by the Securities and Exchange Board of India (Sebi) on April 11, making physical delivery of specified stock derivatives mandatory. Saraf said the trading members objected to the NSEL making them liable for additional amounts if any higher rate is applied by CBDT for levying STT.
NSEL’S circular stated that it reserved the right to recover such additional amount from the trading members if CBDT applies any additional tax in future. “The trade volume goes close to ₹3 lakh crore and if CBDT seeks to apply rates higher, we all [trading members] will go bankrupt,” Saraf said.
These members just collect the tax and hand it over to the exchanges concerned, which are responsible to collect it for the government. “This is a precarious situation,” said the bench. “After one year, they should not be put in a situation where they have to pay crores towards the additional tax burden, especially when they are not liable to levy and collect it,” the bench added.
The bench then directed additional solicitor general Anil Singh to take clear instructions from CBDT regarding the same.
THE HC FELT THAT THE CBDT NEEDS TO CLARIFY THE TAX RATE TO SAVE TRADING MEMBERS FROM ANY UNFORESEEN LIABILITIES