14 October 2019


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President of India gives assent on amendments introduced to the Indian Stamp Act, 1899

21.02.2019

The President of India, gave his assent to the proposed amendments in Indian Stamp Act, 1899. The amendment aims to rationalise and harmonise the system of levying stamp duty and to curb tax evasion. The amendments propose to create the legal and institutional mechanism to enable states to collect stamp duty on securities market instruments at one place by one agency (through the Stock Exchanges or Clearing Corporations authorised by the stock exchange or by the Depositories) on one Instrument. All rates are applicable only on one side (either by the buyer or by the seller but not by both), while presently States charge stamp duty on both sides.

The present system of collection of stamp duty on securities market transactions has 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. This has also given scope for rate shopping and evasion of duty. The proposed amendment would facilitate ease of doing business and bring in uniformity and affordability of the stamp duty on securities across States and thereby build a pan-India securities market. Amendment would create a legal and institutional mechanism to enable states to collect stamp duty on securities market instruments at one place by one agency on one Instrument and develop a mechanism for appropriately sharing the stamp duty with relevant State Governments.

A Co-ordination Council under Article 263 of the Indian Constitution by a separate order/notification of the President of India is also proposed to be created. 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 new changes in system are expected to lead to zero tax evasion. Further, it would mininize cost of collection while revenue productivity is enhanced. 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, leading to balanced regional development.

Tags : Amendment Stamp duty President Assent

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