The President on Thursday gave his assent to the amendments related to financial securities proposed in the Indian Stamp Act, 1899, clearing the way for states to collect stamp duty on securities market at one place by one agency, the government said.
The proposed system is expected to lead to zero tax evasion and minimisation of collection cost.
“Adoption of the centralised collection mechanism is expected to bring in not only more revenue but greater stability to the revenue collection by the states. Further, this system will help develop equity markets and equity culture across the length and breadth of the country, ushering in balanced regional development,” the government said in a statement.
Currently, stamp duty on security transaction is levied by states on both the buyer and seller sides, but the amendment provides for imposition of duty on either one side. Further, the issue of securities is also proposed to be brought into the same tax framework as that of trading of securities, which is authorising depositories to collect duty from companies and redistributing to states based on the domicile state of subscribers of security.
However, the Centre said government securities (G-secs) and instruments based on G-secs (such as repos/reverse repos on G-Secs) have been excluded from the purview of stamp duty. Platforms, which facilitate liquidity adjustments like call money market have also been excluded.
Additionally, the changes in law would end tax arbitrage by providing the same rate of stamp duty for issue or reissue or sale or transfer of securities happening outside stock exchanges and depositories. Further, the Central government would have the power to make rules implementing the new collection mechanism including penalty provisions, the government said.
The common tax rate has been decided on benchmark bases on charges levied by Maharashtra as the state accounts for around 70% of the total stamp duty collection in the country.
“However, the rates are chosen in such a manner that it provides a revenue neutral position to the state governments while reducing overall tax burden for investors,” the government said.
To enable single point for stamp duty collection, the government would create a Coordination Council under Article 263 of the Indian Constitution by a separate order of the President of India. “This Council comprising of representatives from Union and States may be tasked with the responsibility of making recommendations regarding review / revision of stamp duty rates,” the statement said.
Source : Financial Express