Government to withdraw stamp duty relaxation: SE demutualisation
May, 17th 2011
The government has decided to withdraw the stamp duty relaxation available to stock exchanges on demutualisation to put pressure on the ones that have not yet done so. The new stamp duty law worked out by the government says the benefit will lapse one year after the new framework comes into force.
The revenue department has proposed an amendment to the Indian Stamp Act , 1899 to capture the huge change in the Indian economy over the past century. The draft law will be taken up by the cabinet soon.
The finance ministry has noted that the while some of the exchanges like NSE and BSE have taken advantage of the relaxation and demutualised, many others have not done so. The ministry feels putting a sunset clause to Section 8B will put pressure on others to demutualise, a government official told ET.
Under this section of the Act, no stamp duty was levied on instruments related to demutualisation of stock exchanges. The bill to revampe the over century old Indian Stamp Duty Act is likely to be introduced in monsoon session of Parliament. The centre has already concluded discussion with the states, which will see an increase in their collection from the levy under the new law.
Stamp duty accounts for a significant share of the tax revenues of states - in the case of Maharashtra nearly 19%. The bill has also proposed a new system of levy and collation of stamp duty on transactions relating to securities.
Under the new law, states will have the power to increase stamp duty on mining leases if the royalty payments exceed the levels assumed at the time of the lease. Leases are usually for long duration and sometimes extend to about 100 years. States had expressed concerns over losing revenue and had sought additional powers to reassess duty.
"Changes are being proposed to align the law in line with realities," a government official said. The new rule will help states get higher revenues from leasing out of mines, a big source of revenue of resource increasingly seen as an important revenue resource for states.
The law empowers the district collector to call for and examine the instrument to ensure that the royalty value and the duty paid are correct and if he finds that royalty is more, the stamp duty may be increased, the cabinet note stated.
States will also be able to revise periodically the market value guidelines of lands, buildings and various kinds of interests in immovable property for determining the duty chargeable at the time of registration once the bill is passed by Parliament and notified.
Officials said the new section on fixation of market value guidelines had been inserted as it was the most important parameter on the basis of which stamp duty was levied on real estate transactions in states.