The government’s plan to introduce a uniform stamp duty for transactions of all kinds of securities may have hit a roadblock. Though the proposed Indian Stamp (Amendment) Bill may provide an enabling mechanism for a single stamp duty rate for all stock market transactions, it will not be mandatory for the states to shun their respective stamp duty acts and follow the new Act. Moreover, the proposed Bill will not provide a mechanism for a uniform duty on over-the-counter (OTC) transactions.
While the previous system will continue in case of OTC transactions in which financial instruments are directly traded between two parties, in the case of stock market transactions, states will have the option of complying with the Indian Stamps Act and allow stock exchanges to collect the duty and pass it to the states, a government official told Business Standard.
In order to ensure a uniform rate structure across states, the Centre was earlier planning to amend the Indian Stamps Act, 1899, and block the powers of states to fix stamp duty rates in case of securities. In the past, the government had done so in the case of warehousing receipts. However, some states which have their own stamp duty Acts, were opposed to the idea of a uniform duty.
The proposed changes may also take time to come into effect, since the Bill to amend the 112-year old Act is not in the list of the 32 bills to be tabled in the Budget Session of Parliament. The Bill was released for public comments in May 2010, and the government was planning to introduce it this year. According to officials, the Bill has been dropped from the agenda of the Budget Session due to the lack of time. Moreover, with the controversial Constitutional Amendment Bill for Goods and Services Tax on the agenda, finance minister Pranab Mukherjee did not want to take another bill involving states to Parliament, the official said, adding it may now take three to six months to come into effect.
The National Stock Exchange and the Bombay Stock Exchange have given their in-principle approvals for collecting stamp duty, after the states assured them that they would not face any harassment in complying with the new arrangement. Each state will authorise exchanges to collect duty on its behalf and electronically transfer the funds on a fortnightly basis.
