SC to Examine Plea Challenging Constitutional Validity of Securities Transaction Tax

The Supreme Court of India has agreed to examine a petition challenging the constitutional validity of the Securities Transaction Tax (STT) — a direct tax imposed on transactions in listed securities under the Finance Act, 2004.

Petitioner’s Arguments

The petitioner, a stock market trader, argued that the STT violates the fundamental rights guaranteed under the Constitution, including the right to equality, the right to trade or earn a livelihood, and the right to live with dignity.

He contended that the tax amounts to double taxation, as traders are already required to pay capital gains tax on profits made from securities transactions, while STT is charged additionally on the same transaction.

Tax on Transactions, Not Profits

The plea further stated that the STT is unique in being levied merely for carrying out a profession, irrespective of whether the trader makes a profit or incurs a loss.
Unlike other taxes, which are typically based on annual profits or income, STT applies at the time of each trade, making it “punitive or deterrent in nature,” according to the petitioner.

Comparison with TDS

The petition compared STT to Tax Deducted at Source (TDS) for salaried employees.
While TDS is adjusted or refunded during annual tax assessment, no such mechanism exists for STT, forcing traders to pay both STT and capital gains tax without relief.

Background on STT

Introduced in 2004, the Securities Transaction Tax was aimed at curbing tax evasion and improving transparency in the stock market.
It is levied on the value of securities traded through recognised stock exchanges, with different rates for delivery-based and non-delivery transactions.