Uniform stamp duty rates on financial instruments
In what seems to be another move to boost ease of doing business in India, the government is planning uniform stamp duty rates across the country on the transfer of any financial instruments including stocks and debentures.
The move is similar to the Goods and Services Tax (GST) that was launched last year to subsume a slew of cascading state and state taxes. However, the new reform is aimed at making stamp duty charges uniform across the country and the stakeholders have already decided upon the changes to be made in the century-old stamp duty Act, suggested the report
Speaking to the business daily, a top government official confirmed that a proposal is ready, and all the consulted states have agreed to the proposal. The official went on to add that an amendment to implement the change is likely to be floated during the Winter Session of the Parliament. He further added that state revenues will not be affected by the move.
It is worth mentioning that stamp duty is usually levied on documents and transactions involving land purchases, but it was left out of GST’s ambit.
The Parliament prescribes stamp duty rates on financial instruments such as bills of exchange, cheques, promissory notes, bills of lading, letters of credit, insurance policies, stock transfer, and much more. However, if it involves any other financial instrument, the onus on setting stamp duty rates lies with the states.
It may be noted that differential rates in stamp duties have led to arbitrage as intermediaries often route such transactions through states which offer a lower rate. It is worth mentioning that market regulator Securities and Exchange Board of India (SEBI) had earlier advised states to waive off or make stamp duties uniform on financial transactions executed electronically to reduce costs.
While there have been several earlier attempts to amend the 1899 Act for uniform stamp duty rates, but states have overturned such requests as they do not want to lose authority over levying stamp duty.