Supreme Court Seeks Centre’s Reply On Plea Questioning Legality Of Securities Transaction Tax

The Supreme Court on Monday agreed to examine the constitutional validity of the Securities Transaction Tax (STT)- a levy imposed on the purchase and sale of securities through recognised stock exchanges in India.

A Bench led by Justice JB Pardiwala issued a notice to the Union Finance Ministry on a petition filed by Aseem Juneja, a stock market trader, who has challenged the legality of STT, calling it unconstitutional and violative of basic taxation principles.

Juneja's plea argues that STT results in double taxation, as traders already pay capital gains tax on profits from market transactions and are again taxed through STT on the same trades.

“STT is the only tax in India which is imposed on the sheer act of carrying out a profession and has to be paid irrespective of whether there is a profit made or not, which makes it almost punitive or deterrent in nature,” the petition stated.

The petitioner contends that STT violates the right to equality (Article 14), the right to trade or practice a profession (Article 19(1)(g)), and the right to live with dignity (Article 21) under the Constitution.

Advocate Siddhartha K Garg, representing Juneja, said the issue is not about the level of taxation but the legality of taxing transactions rather than profits. He pointed out that STT applies even when traders incur losses, making it “punitive in nature and contrary to traditional taxation norms.”

Introduced in 2004 to curb tax evasion in the stock market, STT functions somewhat like Tax Deducted at Source (TDS) for salaried taxpayers. However, unlike TDS, which can be adjusted or refunded, no such mechanism exists for STT, forcing traders to pay both STT and capital gains tax.

The petition added that the levy violates two fundamental taxation principles: one , it taxes the same transaction twice, and it applies not to profits, but to the act of trading itself.

The Court's Oct. 6 order marks the first major judicial scrutiny of the STT since its introduction two decades ago. The case could have wide-ranging implications for India's stock market taxation framework and its treatment of equity investors.