October 2004, he added. The regulator would submit the findings of its review to the Finance Ministry at the time of its submissions for the next year's union budget proposals.

The Ministry's capital markets division is said to be in favour of reviewing the STT framework with a view of either scrapping it altogether or in a phased manner, but a final call is likely to be taken by the revenue department as such a proposal would lead to loss of tax revenues for the government.

The government is estimated to have garnered about Rs 7,500 crore through STT in the fiscal year 2010-11, while about Rs 7,400 crore was collected during 2009-10. The market players have been demanding withdrawal of STT ever since it was introduced in 2004 and they claim that removal of this levy would help the market grow further. The rate of this levy has anyway come down considerably since its introduction at the rate of 0.15 per cent. Currently, the rates range from 0.025 per cent to 0.125 per cent depending on different market segments such as cash dealings, intra-day trade and derivatives markets. The tax was introduced during the budget proposals for the year 2004-05 by the then Finance Minister P Chidamabram as part a strategy to rationalise the tax structure for the capital market.

However, the levy has faced opposition for all these years and Sebi, as also the stock exchanges and various market entities, have been demanding a review of the STT regime by the government.

Even a high-powered expert panel on potential of Mumbai as an international finance centre had suggested scrapping of the STT levy, saying it was a dampener for the international investors' interest in Indian markets.

The panel -- which comprised eminent persons like former Sebi Chairman C B Bhave, former SBI Chairman O P Bhatt, K V Kamath, Ravi Narain, Nimesh Kampani and P J Nayak -- had also suggested withdrawal of stamp duty levied on the value of instruments used in various market transactions.

A previous draft of the proposed DTC (Direct Taxes Code) bill, which seeks to streamline all the direct taxes in the country, also suggested scrapping of the STT, but the proposal was removed from the bill that was finally introduced in Parliament.

The opponents of this levy argue that the markets should not be subjected to a turnover-based tax as it hampers the business, but the tax has been a good revenue-earning tool and as also helped the tax authorities keep a track for any black money flow into the stocks.