Securities Transaction Tax (STT): A Constitutional Challenge in the Supreme Court
UPSC Relevance
Prelims: Indian Economy (Taxation - Direct vs. Indirect Taxes, Securities Transaction Tax (STT), Capital Gains Tax, Tax Deducted at Source (TDS); Financial Markets).
Mains:
General Studies Paper 3 (Economy): Indian Economy and issues relating to planning, mobilization of resources, growth, development; Government Budgeting. Tax policy and its legal challenges are a core part of this syllabus.
Key Highlights from the News
The Supreme Court has decided to examine the constitutional validity of the Securities Transaction Tax (STT) imposed on stock market transactions.
STT was introduced under the Finance Act of 2004. It is a direct tax.
Petitioner's main arguments:
It is a double taxation. This is because, in addition to paying Capital Gains Tax on profits from the same transaction, STT must also be paid.
This is the only tax in India that is paid irrespective of whether there is a profit or not, levied on the transaction value. This is punitive in nature.
Although it is levied like TDS (Tax Deducted at Source), STT does not offer refunds or the opportunity to adjust it with other taxes, unlike TDS.
The petition also states that this tax violates equality (Article 14) and the fundamental right to practice a profession (Article 19).
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