Mumbai November 5: At the silver jubilee celebrations of the National Stock Exchange (NSE), MD and CEO Vikram Limaye pitched for lower taxes on trading in Indian markets.At the event attended by Finance Minister Nirmala Sitharaman, he said that the high taxation and compliance cost is affecting the competitiveness of Indian markets as compared to other jurisdictions.
"Incidence of multiple taxes from STT, capital gains, stamp duty and GST on capital market transactions is affecting the competitiveness of Indian markets compared to peers," said Limaye.He made a request to finance ministry and the capital market regulator Securities and Exchange Board of India (Sebi) to examine the transaction costs."I request Honourable Finance Minister and Chairman of Sebi to examine the overall transaction costs including taxes, margins and compliance costs to improve competitiveness of Indian markets," Limaye said.
This, according to Limaye, would facilitate an increase in India's weightage in global indices, which would attract more foreign capital.India is one of the few jurisdictions which charges capital gains in form on Long Term Capital Gains (LTCG) on trading in Indian markets, this is in addition to Securities Transaction Tax (STT). These levies on marginal rate, adds to increase compliance costs.
To foreign investors this is also a permanent cost as any taxes they pay in India cannot be offset in their home country as they are anyway tax-exempt. Limaye's statement assumes importance in the backdrop of increased pitch for reducing taxes on market trading after the government moved to reduce the taxes on India Inc.Experts said, nowhere in the world the foreign institutional players are taxed, nor any levy is laid on them. FPI money is considered as “hot money”, as they are accustomed to bring in a lot of money and take away that money with equal speed. They consider any compliance requirement as hurdle in moving from one market to another. And this is the precise reason, it reduces attractiveness of the Indian market among the peers, they added.
Ajay Tyagi, chairman, Sebi in an oblique reference to the NSE, however said that the exchanges should abstain from misusing their oligopolistic position and levy exorbitant fees and charges to market participants.In India there exists only two stock exchanges, The Bombay Stock Exchange (BSE) and the other is NSE.
The Indian stock market’s daily turnover in the cash segment is around Rs 40,000 crore, out of which NSE has a lion share of 95 per cent. Whiel in the futures and options segment, NSE commands almost monopoly, where the daily turnover averages to Rs 1 Lakh.