In a bid to prepare a Bill on amending the century-old Indian Stamp Act of 1899 more relevant, the government is putting provisions to check that states do not fix stamp duty rates arbitrarily. The Bill seeks to empower stock exchanges to collect the stamp duty on securities transaction in a centralised manner, simplify the rate structure, and introduce some new terms, among other amendments.
The Centre has, however, failed to convince states to have a uniform rate structure. The Indian Stamp (Amendment Bill), 2011, will be sent to the Cabinet soon for approval. The government has received feedback from various departments on the Bill and is in the process of giving it final touches. It is slated to be introduced in the ongoing monsoon session of Parliament.
“The Centre cannot fix the rates. Though states have the powers to decide on the rates, we can put a provision in the Stamp Act which puts an indirect ceiling on the rates. So, despite not having the power to fix rates, the Union government can intervene indirectly… We are trying to bring in place something where stock exchanges can collect the duty,” a government official told Business Standard.
The reasons behind roping in stock exchanges are to collect the duty in a centralised manner and simplify the process.
The states will have the option to adopt the Indian Stamp Act and authorise exchanges to collect duty on their behalf and electronically transfer the funds to them on a regular basis. At present, states follow different routes for collecting stamp duty. In some states, brokers collect the duty.
The Bill seeks to change the definition of many terms which have become obsolete and define new terms like future and options which were not used when the Act was introduced. Some of the definitions will be changed to bring them in line with the definitions mentioned in other Acts such as the Companies Act or the Sebi Act.
The official said the proposed Act would be more contextual and would remove instruments such as bottomry bonds which have lost relevance today. Some penalties would go up but the discretion part had been reduced, the official said, adding that stamp duty rates on currency futures, debt instruments, pass-through certificates and security receipts were yet to be decided.
The Bill defines e-stamping, which is not included in the existing Act. Irrelevant details in case of some instruments will be removed. For instance, details on stamp duty on insurance have been reduced from four pages to three lines.
The existing Act still talks about stamp duty in denomination of ‘annas’ — a term not used anymore. The limits for stamp duty requirement on various transactions will be increased. For instance, currently, a one-rupee stamp is required on a transaction of Rs 20 and above such as rent receipts. The Bill proposes to increase the limit to Rs 50,000.
The stamp duty rates prescribed by Parliament in respect of bills of exchange, cheques, transfer of shares prevail all over India. However, other stamp duty rates on agreements, affidavits, mortgage and security bonds are valid only in Union Territories. Many states have their own Stamp Acts and it is not mandatory for them to adopt the Centre’s Act. However, if there is a conflict between state and central union laws, the Union law prevails.
