In continuation of the budget announcement, here is the link to the notification from the Ministry of Finance.
Below are the rates that everyone will have to pay going forward:
|Type of trade||New stamp duty rate|
|Delivery equity trades||0.015% or Rs 1500 per crore on buy-side|
|Intraday equity trades||0.003% or Rs 300 per crore on buy-side|
|Futures (equity and commodity)||0.002% or Rs 200 per crore on buy-side|
|Options (equity and commodity)||0.003% or Rs 300 per crore on buy-side|
|Currency||0.0001% or Rs 10 per crore on buy-side|
As per the finance bill, The stamp duty is only on the buy-side of the transaction so, in essence, the actual rate would be just 50% of the above rates. Currently, it is charged on both buy and sell.
- One rate for all makes it a level playing field.
- The rates are generally lower for most states - by almost 50% (except states which had a maximum cap per day). So lesser transaction cost for active traders.
- Brokers had to earlier worry about collecting and paying to all the states, exchanges will do it now. A lesser operational burden on brokerage firms.
- Over 50% of trading volumes on exchanges are contributed by HFT firms/Prop shops who are themselves members on the exchange. There was no stamp duty on prop trading as a broker who trades for himself doesn’t have to generate a contract note. First reading, it seems like all of them will also have to start paying stamp duty.
Most of them run arbitrage strategies which generate large volumes with very thin margins. This stamp duty cost will definitely increase the transaction cost significantly and can potentially bring down the trading volumes on the exchange. Lower trading volumes mean higher impact cost for everyone else. The broking community will surely make a representation to get this clarified from the Govt, ideally, there should be no stamp duty on such trades that are executed for your own self.
You can check this google doc with current stamp duty to see how the new rates affect you.
I guess the ones who will get adversely affected are active traders based out of states where there was a maximum cap on the stamp duty per day, like Haryana, Andhra Pradesh, etc. The ones who will benefit are clients from states like Tamil Nadu, Goa, etc where it was higher than the new rates. It remains nearly unchanged for most other states. Currency traders from states where there was no maximum cap per day earlier, will be the biggest beneficiaries - a reduction from Rs 200/crore to just Rs 10/crore in states like Maharashtra, Delhi, etc.
But yeah, this levels out the playing field in terms of costs for all traders in the country.
Brokerage firms like us will have one less thing to worry of collecting and depositing stamp duty to all the states every month as like in STT, the exchange will collect it from the brokerage firm and deposit it with the Govt.