Sebi chief U K Sinha today said that Securities Transaction Tax (STT) should be used in such a way that it incentivises people to make investments for the long term rather than reap short term benefits.
Sinha, the chairman of Securities and Exchange Board of India, also said that the STT rate is rather high now.
"(STT) should be used in a manner that people (investors) are incentivised to invest for the long term rather than for short term (speculation)," Sinha told reporters on the sidelines of launch of National Stock Exchange's listing platform for Small and Medium Enterprises here.
Noting that STT is the prerogative of the government, Sinha said it is not something where the market regulator can take a call.
"Sebi's view has been that in securities market, the tax rate is rather high," he noted.
According to him, taxes should be across various segments of various markets rather than only in the securities market.
NSE Managing Director and CEO Ravi Narain too echoed similar views.
Asked about STT, Narain said all asset classes should be treated equally for taxation purposes and there should not be any arbitrage between two different asset classes.
Market entities and various industry bodies have been strongly demanding a complete abolition of STT, which was lowered earlier this year in the Union Budget.
Earlier this month, the government-appointed panel for rationalising the proposed General Anti Avoidance Rule tax regime had suggested a hike in the STT.
Portfolio investments in listed securities attract STT at rate of 0.1%.
A hike in STT rate would increase costs of equity transactions.
The levy was introduced in 2004.
In its draft report, the Shome panel said, "The government should abolish the tax on gains arising from transfer of listed securities, whether in the nature of capital gains or business income. In order to make the proposal tax neutral, the government may consider to increase the rate of STT appropriately," the panel, headed by Parthasarathi Shome, had said.
