Securities tax mop-up at 70% of Budget target amid market rally

More than 70 per cent of the budgetary target for collection of the securities transaction tax (STT) has been achieved by August itself, on the back of increased retail participation in the stock market.

The STT collection as on August 12 stood at ~8,800 crore, against the target of ~12,500 crore. In fact, the growth is 64 per cent over the mop-up of ~5,291 crore until August 2020. “The sharp increase in the STT collection can be attributed to an overheated market,” J B Mohapatra, chairman of the Central Board of Direct Taxes, told Business Standard.

The STT is a direct tax payable on the value of taxable securities transactions done through a stock exchange. It is levied at 0.1 per cent of turnover for delivery-based equity transactions, while for intraday transactions, the STT for purchase is nil; for sale, it is 0.025 per cent of the turnover. The net direct tax collection witnessed 87 per cent YOY growth to ~3.56 trillion until August 12. Gross collection at ~4.05 trillion was 46.1 per cent higher YOY and refunds were down nearly 32 per cent.

“This is the best year in terms of direct tax collection in the past four years. That's because some sectors are doing wonderfully well. Maybe there is pent-up demand in high revenue areas. Generally, corporates are doing well,” said Mohapatra.

The Budget had pegged revenues from direct taxes at ~11.08 trillion, necessitating 17 per cent over the 2020-21 actuals. Last year, the direct tax mop-up at ~9.47 trillion was 9.7 per cent lower than the previous year due to the impact of the pandemic but exceeded the revised estimate of ~9.05 trillion.