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The finance ministry has proposed uniform stamp duty rates on transactions of securities across states. For this, it has prepared a draft Bill to amend the Indian Stamp Act, 1989.
In the draft, the ministry, for example, has suggested a stamp duty rate of 0.0001 per cent of the value of transaction on the sale of currency derivatives through off-market transactions. For futures and options in the commodity exchanges, it proposed a stamp duty at the rate of 0.003 per cent. Currently, Maharashtra levies 0.0001 per cent on most transactions, while many states don't levy any stamp duty on these deals.
The draft provides for payment of the duty by the seller of the security through a new system, where exchanges will collect the duty and pass it on to state governments, thereby reducing their administrative costs.
"It proposes a new system of levy and collection of stamp duty on transactions related to securities by exchanges by deducting the same from the trading member's account at the time of settlement of transactions," said a finance ministry official.
Currently, state government machinery collects the duty and not exchanges. In some states, the buyer pays the duty, while in some others the seller.
An amendment has also been proposed to bring clarity about the value of transaction of stock and marketable securities on which stamp duty is to be charged instead of the average price or value on the day of the transaction.
The draft has proposed deleting some sections, which have become obsolete and bring new definitions, introduce e-stamping, amend and enlarge the list of instruments to be stamped with adhesive stamp, pay duty on immovable property transactions on market value among others.
There are modifications of provisions relating to special economic zones (SEZs) to plug chance of duty evasion by developers, when they execute instruments not related to land. Besides, there is a provision for a review of stamp duty on instruments of mining lease, where proper discovery of price or value has not been made to prevent the loss of revenue to states within 10 years from the date of execution of such an instrument.
A provision has been made to check undue advantage of different rates of stamp duty in different states. If an instrument has been produced in a state with a higher duty, the person responsible for paying the stamp duty will have to pay the differential.
As per the draft Bill, authorities will have power to open books for inspection, call for information, enter premises, inspect, seize and impound documents, and make rules.
The finance ministry has invited feedback on the draft Bill which may be tabled in Parliament by the next government as a consensus has been reached with states on these issues.
While many states have adopted the Indian Stamps Act, certain states have their own standalone stamp laws. These states will have the right to continue with the existing system and collect more than the rates proposed by the Centre, but the finance ministry is confident that most states would adopt the model law as it was expected to result in buoyancy in revenues due to a wider tax base.
"Generally states should adopt the proposed new Act. There is no reason for states not to adopt the Act," Mehul Modi, senior director Deloitte India said.
NEW REGULATIONS
* Stamp Duty Act of 1989 is likely to be amended
* FinMin prepares draft for new Bill
* Proposes uniform stamp duty rates on transactions in securities
* It would be a kind of model law; states will have discretion to adopt it
