CBDT asked to clear ambiguity over STT on physical settlement in F&O

The Bombay High Court today asked the Central Board of Direct Taxes (CBDT) to clear the ambiguity over the securities transactions tax (STT) rate on physical delivery of shares in the equity derivatives segment.

A division bench of Justices B R Gavai and M S Karnik was hearing a petition filed by the Association of National Exchanges Members of India (ANMI) against a July 17 circular issued by the National Stock Exchange (NSE).

The circular directed the members in the equity derivatives segment to collect the STT on physical settlement of stock derivatives at the rate of 0.10 per cent with effect from July 26.

It added that if the CBDT issued any clarification or amendment on taxation of physically settled F&O contracts, the exchange would recover such additional tax burden from the members.

ANMI, a brokers' association, claimed in the petition that this was leading to an ambiguous situation.

The NSE seeking to "illegally" pass on a burden of any additional taxation is "illegal and arbitrary", it said.

The bench directed Additional Solicitor General Anil Singh to contact the CBDT chairman or the secretary of the finance ministry to get a clearer picture.

"This is a precarious situation. Whatever the rates. ...higher or lower...the picture needs to be clear," Justice Gavai said.

The court posted the petition for further hearing on August 28.