India needs derivatives for high economic growth. STT hike is a bad move

Contributing sentiments towards policy:

56% : It is like paying tax each time a potato changes hands -- from a wholesaler to a retailer, and from a retailer to your kitchen -- regardless of profit or loss.
56% : In FY2024-25, STT collections were about Rs 53,095 crore, while total direct tax collections were about Rs 25.87 lakh crore -- the STT made up about 2.1 per cent of total direct taxes.
55% : The tax is not on consumption or profit, but on the transaction.
55% : Better still, government expenditure could have been rationalised.
54% : It is also pertinent to evaluate how important the STT is to India's tax revenues.
53% : This is not true of India, where a long-term capital gains tax (LTCG) exists in addition to the STT, and the latter is stacked on top of derivatives trading.
52% : An STT, on the other hand, is a tax on transactions, regardless of what the transaction is for and whether it is profit or loss-making.
52% : In the context of financial markets, the STT implies that a market maker, a speculator, and a hedger merely rolling a position pay the same tax, and pay it repeatedly.
52% : We must remember that in shallower markets such as ours, marginal trades matter far more, and hence a transaction tax is likely to affect more.
50% : One may argue that several jurisdictions around the world also have an STT or a similar tax.
50% : For a tax that can have such an outsized effect on market behaviour, it adds very little to total revenue.
48% : Further, the STT has to be seen in the context of the full range of taxes -- stamp duty, GST, and capital gains -- all of which make India an expensive destination for foreign portfolio investors in comparison to other Asian markets.
48% : By increasing taxes on derivatives transactions, India is damaging its ability to manage economic growth.
46% : If the STT has been increased to meet revenue requirements, then there are other, cleaner taxes that could have been imposed.

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