M'shtra slaps stamp duty on bank deals in gilts, corporate bonds

The Maharashtra government has directed all commercial banks to pay stamp duty on deals in government securities and corporate bonds.

According to money market dealers, the government has asked banks to pay duty on deals struck on the wholesale debt market segment of stock exchanges and the negotiated dealing system monitored by the Reserve Bank of India.

"Till now, stamp duty on debt market deals was paid by brokers and primary dealers. Now, the government wants banks also to pay the duty," said a dealer.

Dealers have put the total collection roughly around Rs 25-30 crore annually on a daily average volume of Rs 6,000-7,000 crore in government securities and corporate bonds.

According to an official source, even though the amount right now is not much, the tax has been imposed with a long-term perspective as the debt market is set to grow in line with rise in government expenditure. It also believes that the tax collection too will grow.

Meanwhile, the state is considering a further cut in stamp duty on equity market transactions. At present, it levies 20 paise and Re 1 on every Rs 10,000 non-deliverable and deliverable shares, respectively. The state targets at least Rs 200 crore from stamp duty collection every year.

The state had earlier approached stock exchanges for sharing the stock market data for scrutiny of brokers' business to ensure better compliance of stamp duty collection.

The state has already revamped the stamp duty collection system by dismantling government counters and it plans to appoint retail vendors for distributing stamps by licensing banks, financial institutions and stock brokers.

This will be part of a state-wide network of computerised stamp administration system. It has already licensed the Bank of Rajasthan, ICICI Bank, HDFC Bank and the IndusInd Bank for this business.

In May this year, in a fresh ordinance, the state reduced stamp duty rates on debt and securities market by 95 per cent.

Stamp duty on corporate bonds now works out to be Rs 50 per Rs 1 crore deal or 0.05 paise on a volume of Rs 100. Earlier, the government had imposed a duty of one paise on a deal amount of Rs 100, which resulted in a duty of Rs 5,000 for a deal of a minimum lot of Rs 5 crore.