New Delhi: President Ram Nath Kovind Thursday gave his assent to changes in the Indian Stamp Act, 1899, which will rationalise and harmonise the system of levying stamp duty and help curb tax evasion. The Amendments to the Indian Stamp Act, 1899, were introduced as part of the Finance Act 2019, and was approved by Parliament. 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), the Finance Ministry said in a statement.
A mechanism for appropriately sharing the stamp duty with relevant state governments based on state of domicile of the buying client is also proposed, it added. “Subsequent to the enactment of the Act, it is proposed to create a Coordination Council under Article 263 of the Indian Constitution by a separate order/notification of the President of India,” the Ministry said. This Council comprising representatives from Union and States may be tasked with the responsibility of making recommendations regarding review / revision of stamp duty rates.
The proposed rationalised and harmonised system is expected to lead to zero tax evasion. “Further, cost of collection would be minimised 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, ushering in balanced regional development,” the Ministry added.
As regards the stamp duty rates, the ministry said that the duties levied by Maharashtra will be taken as a benchmark as it accounts for 70 per cent of the total collection. “However, the rates will be chosen in such a manner that it provides a revenue neutral position to the state governments while reducing overall tax burden for investors,” it added. The stamp duty will have to be paid by either the buyer or seller of a financial security, as against the current practice of levying the duty on both, the ministry added.