'New platform can offer a lot to SMEs'

BANGALORE, INDIA: By November this year, the Finance Ministry is planning to abolish the Securities Transaction Tax (STT) on trade of equity of small and medium enterprises on SME exchanges.

Securities Transaction Tax (STT) was introduced in India in 2004 by the then finance minister P. Chidambaram to circumvent the tax avoidance of Capital Gains tax. This tax is payable whether you buy or sell a share and gets added to the price during the transaction itself.

The flip side is that you end up paying this tax even if you have not made any gains at all.

By doing away with STT, volume of trading will improve on stock exchanges. This is very encouraging news for SMEs as they can seek advantage of listing. It is also encouraging because, the BSE and NSE are proposing to set up SME exchange shortly (of course this was delayed considerably. It is now slated for October launch).

This separate platform for SMEs will give an advantage and a level-playing field for SMEs when it comes to stock trading and listing.

Also read: BSE SME Exchange provide great opportunities

The big question now is how many of our SME friends would like to explore this opportunity? Today India houses over 25 million SMEs in various parts of the country, of which one million have the potential to be listed on this exchange, according to BSE.

However, the information that I received from the industry is not so encouraging. Very few SMEs have shown interest in getting listed.

Already BSE (Bombay stock exchange) is planning to conduct nationwide seminars to spread awareness regarding SME Exchange. Its not enough, it is also the responsibility of SME associations to educate and inform about the SME exchange to their community.

Also read: 10 Gujarat-based firms may list on SME Exchange

Today SMEs are largely focusing on the domestic market. But this sector needs to look at the greater opportunities opening up internationally. The proposed exchange will address this need in expanding their reach and as well as, support them in much-needed fund-raising options for the SMEs.