Generally it is the Union Budget presented by Finance Minister of India which creates a lot of furor in the securities markets. But this time around, there is a state budget which is causing market participants some panic in operations. It is the Maharashtra State Budget.
Ajit Pawar, Finance Minister and Deputy Chief Minister of Maharashtra, presented the state’s budget for 2011-12 and since then has been in news and not for very good reasons.
Among other steps, what concerns securities markets is amendment in the stamp duty structure on transactions at exchanges. It is proposed that all market deals will be subject to unified stamp duty rate of 0.005%. That translates into Rs 500 stamp duty on every Rs 1 crore of transaction done and would apply on all equity, commodity and currency market transactions. Presently, in the cash segment, the average stamp duty is Rs 240 on every Rs 1 crore trade, both intra-day and delivery-based. In futures and options, it is Rs 200 on every Rs 1 crore trade.
This however, does not seem too steep for normal investors who trade with small volumes, but the same has a big impact on the traders and arbitragers who work on a very thin margin. If implemented, this would erode the profitability of jobbers/speculators/arbitragers who operate out of Maharashtra. Considering that about 70% of BSE’s and 55% of NSE’s volume come from Maharashtra, this might have an impact on the liquidity of the exchanges as well. After the announcement, many brokers/market participants are considering moving their offices out of the state.
In my personal view, other state government might follow Maharashtra’s foot steps making it difficult for market participants all over the country.
As of now, for retail investors, trading through Mumbai based brokers, get ready to pay a bit more to your broker under the name of regulatory costs.
Other Highlights of Maharashtra’s budget for 2011-12:
|Taxes and Duties||Sops|
|Liquor to cost more, as per different slabs.||Tax on vada-pav reduced to 5 percent from 20 percent.|
|Tax on soft drinks enhanced from 12.5 percent to 20 percent.||Tax rate on dry fruits to be 5 percent.|
|Goggles to cost more, to be taxed at 12.5 percent.||Tax exemption to rice, wheat and pulses to continue.|
|Uniform stamp duty rate of 0.005 percent on all share market transactions.||Domestic cooking gas will continue to be tax free.|
|Duty on tenancy right transfer to be at market prices.||Amnesty scheme for rehabilitation of sick sugar factories.|
|Dhoop and agarbati to be totally exempted from tax.|
|Tax exemption to bio-gas units.|