HC upholds NSE's move to levy higher STT on physically settled contracts

The Bombay High Court on Tuesday has upheld the National Stock Exchange’s (NSE) move to levy higher Securities Transaction Tax (STT) on derivative contracts that are settled physically. 

A lobby of brokers had moved the court, to seek clarity on the STT slab applicable to stocks for which the markets regulator had made physical settlement mandatory. 

The decision of the Bombay High Court comes after the Central Board of Direct Taxes (CBDT) told the court on Tuesday that 0.10 per cent STT would be levied on physical delivery of shares in the equity derivatives segment. This is ten times the normal STT rate applicable on other equity derivatives. 

A division bench of justices B R Gavai and M S Karnik had asked CBDT to clarify on the issue. 

The brokers’ lobby had moved the court challenging NSE’s direction dated July 26.

“We find that the CBDT clarification takes care of the situation. All the stakeholders including the petitioner association and the NSE are now aware of the STT payable. Hence, it will not be difficult for the petitioner association to recover money from the traders,” said Justice Gavai. Brokers have welcomed the decision as it puts an end to the impasse. 

“We are thankful to the Bombay High Court for directing the concerned authorities to give clarity on the matter related to rate of STT applicable on physically settled derivatives. The CBDT has provided clarification on the rates of STT applicable on such delivery based transactions," said  Rajesh Baheti, president of brokers lobby ANMI .