Stamp duty to go soon

Revenue secretary says the process to be complete two months

Bowing to pressure from the markets, the state government has agreed in-principle to waive duty on stock market transactions originating outside the state.

Speaking to Business Standard, the state revenue secretary (stamp duty) K S Vatsa said: "We are working out modalities with Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) on segregating the trade generated from within the state and outside the state and we expect that system would be in place in two months time."

By issuing an ordinance in May this year, the state government amended the Bombay Stamp Duty Act and levied the stamp duty on all non-delivery based transactions on BSE and NSE.

Reacting sharply to the amendment, market players had approached Securities and Exchange Board (Sebi), which in turn approached the finance ministry.

The brokers' objection to the state government's move was that it amounts to double taxation as outside traders are paying the stamp duty in their respective states too.

The government on other hand argued that it was impossible to segregate the trade generated outside state from trade originated within the state and claimed that legally it was on a sound footing in levying stamp duty on the transactions regardless of the origin.

Vatsa clarified, "Since all the transactions carried out on BSE and NSE is subject to the jurisdiction of courts in Mumbai, legally and technically, we are very much within our jurisdiction to impose the stamp duty on entire trading activity."

Further on, he added, "But administratively, it is impossible to collect the duty on all the transactions and besides, we didn't want to give impression that we want to collect the stamp duty for the entire country. Besides this, the state government doesn't want to give an impression that it is apathetic towards the growth of capital markets."

Vatsa admitted that the state government had indeed received an advisory letter from Union finance minister P Chidambaram but he said, "Chidambaram's letter only advised us to be pragmatic, far-sighted and generous in our approach to the issue."