Physical settlement in F&O to attract 0.10% STT - CBDT

Delivery-based or physical settlement in the equity derivatives segment will attract securities transaction tax (STT) of 0.1 per cent, the Central Board of Direct Taxes (CBDT) told the Bombay High Court on Tuesday.

The clarification comes after Mumbai-based stock brokers association ANMI dragged the NSE to court on the levy of STT on the newly-introduced physical settlement of equity derivatives trades. ANMI had in particular challenged the NSE’s July 17 circular that said the exchange reserves the right to collect more STT from brokers retrospectively if specified by the Tax Department.

A division bench of Justice BR Gavai and SM Karnik had last week directed Additional Solicitor General Anil Singh, appearing for the CBDT, to clarify the point. On Tuesday, Singh said that 0.1 per cent STT would be levied on all transactions, including physical delivery of shares in the equity derivatives segment.

“The CBDT clarification takes care of the situation. All stakeholders... are now aware of the STT payable. Hence, it will not be difficult for petitioner association to recover money from traders,” said Justice Gavai. The bench disposed of the petition.

Internally, the CBDT took a view that settlement of derivatives segment transactions by delivery of shares was not different from cash segment settlement system, and so the STT should be the same. The CBDT believes the legal mandate of STT is wide enough to cover delivery-based derivatives transactions. #casansaar (Source - The Hindu Business)