STT and cost of transaction

The argument that the abolition of STT on cash and derivative transactions in listed instruments could enhance volumes and improve market depth does not carry conviction and is not a solution either to reduce transaction cost or improve the revenues though capital gains tax instead of STT.The convenience of collecting STT and the inconvenience of collecting capital gains tax with all its disadvantages of tracking the transactions and arriving at the capital gains tax with room for ever ending disputes etc have to be weighed by the Govt before removal of STT. Further, the capital gains can be adjusted against capital loss which also can be disputed adding to the workload of both the IT administration and assesees. No doubt STT needs a flexible approach and this can vary for individuals and institutions with different cut off limits in the volume of transactions.To reduce the transaction cost, the brokerage,demat charges etc can be reduced considerably.

(This is in response to the editorial Costless tarding appeared in Business line dated 25/2/11).