NSE seeks cut in tax on capital market transactions to boost investment

Vikram Limaye said several taxes, including the securities transaction tax and the goods and services tax, are hurting investor participation

The National Stock Exchange (NSE), the largest bourse in the country, has pitched for a reduction in taxes levied on capital market transactions, in a bid to increase the attractiveness of the domestic market.

 

Speaking at an event to celebrate the exchange’s 25th anniversary, Vikram Limaye, managing director and chief executive officer, NSE, said several taxes, including the securities transaction tax (STT) and the goods and services tax (GST), are hurting investor participation.

 

“Incidence  of  multiple  taxes — from the STT,  the capital  gains tax,  stamp  duty,  and  the GST — on  capital  market  transactions  is affecting  the  competitiveness  of  Indian  markets  compared  to  peers. A streamlined  tax  structure  would  significantly  enhance  the attractiveness  of  our markets  and wider participation  would enhance liquidity  across  securities,” Limaye  said.

 

He was sharing the stage with Finance Minister Nirmala Sitharaman and Securities and Exchange Board of India (Sebi) chief Ajay Tyagi.

 

In recent weeks, the market has been abuzz with speculation that the government is reviewing various capital market taxes such as the long-term capital gains tax (LTCG) and the dividend distribution tax (DTT).

 

“I request the finance minister and Sebi chairman to examine the overall transaction costs, including taxes, margins and compliance costs, to improve the competitiveness of Indian markets. This would also  facilitate  an  increase  in  our  weightage  in  the global  indices,  attracting more  foreign  capital.  Deep  and  liquid  secondary  markets  are  important  to facilitate  primary  capital  raising  and  we  need  to  improve  the  breadth and depth of  our  secondary  markets,” said Limaye.

When asked if the government was indeed considering a reduction in taxes, Sitharaman refused to comment.

On the sidelines, Tyagi said any reduction in the capital market tax would be a welcome step, adding that he was not privy to any such discussions.