Centre Notifies Amendments To Indian Stamp Act For Collection Of Stamp Duty On Securities [Read Press Note]

The Central Government has enforced the amendments to the Indian Stamp Act, 1899, as proposed under Part I, Chapter IV of the Finance Act, 2019, from July 1 onwards. The amendments, related to collection of Stamp Duty on securities, were first scheduled to come into force on January 9, 2020, which was later extended to April 1, 2020 vide notification dated January 8, 2020. The implementation was further extended until July 1, 2020, vide a gazette notification dated March 30, 2020. Amendments to the present system of collection of stamp duty on securities market transactions were introduced as the erstwhile system led to multiple rates for the same instrument, resulting in jurisdictional disputes and multiple incidences of duty, thereby raising the transaction costs in the securities market and hurting capital formation. The Central Government has now created the legal and institutional mechanism to enable states to collect stamp duty on securities market instruments at one place by one agency. "In order to facilitate ease of doing business and to bring in uniformity of the stamp duty on securities across States and thereby build a pan-India securities market, the Central Government, after due deliberations and consultations with the States, through requisite amendments in the Indian Stamp Act, 1899 and Rules made thereunder, has created the legal and institutional mechanism to enable states to collect stamp duty on securities market instruments at one place by one agency (through Stock Exchange or Clearing Corporation authorized by it or by the Depository) on one Instrument. A mechanism for appropriately sharing the stamp duty with relevant State Governments has also been developed which is based on the state of domicile of the buyer," the press note states. This rationalized and harmonized system through centralized collection mechanism is expected to ensure minimize cost of collection and enhance revenue productivity. Salient Features To achieve the rationalization of stamp duty structures, the amendments, inter-alia, provide for the following structural reforms — The stamp-duty on sale, transfer and issue of securities shall be collected on behalf of the State Government by the collecting agents who then shall transfer the collected stamp-duty in the account of the concerned State Government. In order to prevent multiple incidences of taxation, no stamp duty shall be collected by the States on any secondary record of transaction associated with a transaction on which the depository / stock exchange has been authorised to collect the stamp duty. In the extant scenario, stamp duty was payable by both seller and buyer whereas in the new system it is levied only on one side (payable either by the buyer or by the seller but not by both, except in case of certain instrument of exchange where the stamp duty shall be borne by both parties in equal proportion). The collecting agents shall be the Stock Exchanges or authorized Clearing Corporations and the Depositories. For all exchange based secondary market transactions in securities, Stock Exchanges shall collect the stamp duty; and for off-market transactions (which are made for a consideration as disclosed by trading parties) and initial issue of securities happening in demat form, Depositories shall collect the stamp duty. The Central Government has also notified the Clearing Corporation of India Limited (CCIL) under the jurisdiction of RBI and the Registrars to an Issue and/or Share Transfer Agents (RTI/STAs) to act as a collecting agent. The objective is to bring OTC derivative transactions reported to CCIL and physical space (non-demat) transactions in mutual funds handled through RTI/STAs under the ambit of stamp duty regime so as to avoid any tax arbitrage. The collecting agents shall within three weeks of the end of each month transfer the stamp-duty collected to the State Government where the residence of the buyer is located and in case the buyer is located outside India, to the State Government having the registered office of the trading member or broker of such buyer and in case where there is no such trading member of the buyer, to the State Government having the registered office of the participant. The collecting agent shall transfer the collected stamp-duty in the account of concerned State Government with the Reserve Bank of India or any scheduled commercial bank, as informed to the collecting agent by the Reserve Bank of India or the concerned State Government. The collecting agent may deduct 0.2 per cent of the stamp-duty collected on behalf of the State Government towards facilitation charges before transferring the same to such State ...

Centre Notifies Amendments To Indian Stamp Act For Collection Of Stamp Duty On Securities [Read Press Note]

LIVELAW NEWS NETWORK

Tags