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 the ministry and Securities and Exchange Board of India or 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 the competitiveness of Indian markets,” Limaye said. This, according to Limaye, would facilitate an increase in India’s weight in global indices, which would attract more foreign capital.
India is one of the few jurisdictions which charges capital gains in the form of Long Term Capital Gains (LTCG) on trading in Indian markets, this is in addition to Securities Transaction Tax (STT). These taxations on marginal rate add 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 the increased pitch for reducing taxes on market trading after the government moved to reduce the taxes on India Inc. The Finance Minister, however, did not respond to the pitch for reducing taxes on market trading.