High taxation in the stock market is resulting in a shift in trading to overseas markets and other segments like commodities, said Ashish Chauhan, interim chief executive officer, Bombay Stock Exchange (BSE).
"Securities transaction tax (STT) is the equities market is leading to export of investors to the commodities market, where there is no such tax. Also, investors are finding it more attractive to trade (in Indian indices) in places like Singapore and Dubai," he said at a conference hosted by The Institute of Company Secretaries of India (ICSI).
According to an analysis conducted by McKinsey & Company, the total transaction costs in India is almost three times higher than in Singapore and this has resulted into trades moving offshore.
The consultancy firm believes it is critical that the cost of equity trading in India is in line with other developed markets to attract foreign flows and keep markets onshore.
Chauhan questioned the rationale behind no STT on 'unproductive commodities' like gold and silver, "import of which is proving to be a strain on India's trade deficit".
"Around $80 billion worth of gold and silver is getting imported every year. If that kind of money is channelised in the stock market, more than 40 lakh jobs would be created," Chauhan said.
"No tax on bullion trading and highest tax on delivery-based trading is similar to not levying any taxes on cigarettes and taxing food items," he quipped.
In the cash segment, STT is charged between 0.025 per cent and 0.125 per cent for non-delivery-based and delivery-based transactions, respectively. While, for transactions in the derivatives segment, STT is levied in the range of 0.017 per cent and 0.25 per cent, depending on the nature of the transaction.
Meanwhile, to spread awareness about the financial market, BSE has collaborated with the Ministry of Corporate Affairs (MCA) and ICSI to conduct a series of 100 investor awareness programmes in three months in western India.
