Maharashtra extends duty sop for non-delivery share deals

Reduced stamp duty of 0.002 per cent to continue for another year

The Maharashtra government has decided to extend for another year the reduced stamp duty rate of 0.002 per cent on non-delivery based share transactions originating in Maharashtra.

Confirming this, revenue secretary (relief and rehabilitation) KS Vatsa said: "The order to continue the exemption rate of 20 paise per thousand on non-delivery based share transaction is under issuance and should be out in a week's time."

This is for the second time that an extension is being given on the lowered rate of stamp duty to the broking community.

While four years back the effective rate of stamp duty had been reduced from 0.02 per cent to 0.002 per cent on non-delivery based share transactions, there was only a marginal increase in revenue for the state government from such transactions on the Bombay Stock Exchange (BSE) in the ensuing three years.

This resulted in a rethink by the state when the exemption period of three years expired on March 31, 2003.

The BSE had then claimed that a reduction in the number of brokers operating on the two exchanges (BSE and NSE) had resulted in a decrease in the number of transactions, leading to a the state government receiving more or less on the same levels of revenues.

However, there was a sharp increase in stamp duty collections from non-delivery based share transactions in the last fiscal, when the exemption was continued for one more year.

Revenues in the first nine months of 2003-04 from stamp duty increased to Rs 79 crore. The state department expects the revenue collections under this head to reach Rs 100 crore once the data for the full year is compiled.

The previous financial year (2002-2003) had seen revenues of Rs 52 crore collected by the state department from NSE and BSE on deliverable and non-deliverable share transactions at the rate of 0.002 per cent per transaction.

The rates for stamp duty in Maharashtra is currently Rs 1,000 for delivery trades on a turnover of Rs one crore and Rs 200 for non-delivery trades in the cash segment.

Brokers in some other states pay lower duties. The rate is Rs 200 per Rs one crore transacted in Gujarat, Rs 100 in Andhra Pradesh and no duty at all in Tamil Nadu.

But brokers in Kolkata and Delhi pay the same rate of duty at Rs 1000 on a turnover of Rs one crore.

The stamp duty charged by the state government is the major cost component on the execution of securities transaction. The cost is fully passed on to the investors.