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-Rajeev Kumar (Editor-in-chief)

Saturday, July 4, 2020

Welcome changes to stamp duty rates : The Economic Times Editorial

It is welcome that the Centre has rationalised and standardised stamp duty rates on securities market transactions from July 1, and streamlined the collection mechanism. Shares, mutual fund purchases and debt instruments generally would attract a stamp duty of 0.005%, and for transfer of security it would be 0.015%. Stamp duty and registration fees yield sizeable revenue for states, about 0.7% of GDP annually. But till last month, we had multiple stamp duty rates across states for the same instruments, leading to routine jurisdictional disputes and multiple incidences of duty. That meant high transaction costs in the securities market that simply hurt capital formation.

The Finance Act of 2019 did amend the Indian Stamp Act, 1899; its implementation was delayed by Covid-19. Earlier, stamp duty was payable by both seller and buyer. In the new system, it is levied only on one side, payable either by the seller or the buyer, save for certain instruments of exchange where stamp duty would be borne by both parties in equal proportion. The rules require that stock exchanges, clearing corporations and depositories collect the stamp duty and pass it ‘within three weeks of the end of each month’ to the concerned state where the residence of the buyer of the security is located. Surely, with digital transactions, the funds transfer can be far quicker so as to boost revenue productivity.

Notably, no stamp duty is chargeable on transactions of stock exchanges and depositories setup in onshore IFCs like GIFT City. The rationalisation means much lower stamp duty rates for interest-rate, currency derivative instruments and also for repo, or repurchase, obligation in corporate bonds. The continuing incongruity of taxation of securities transactions needs addressing.
Courtrsy - The Economic Times.
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इस वेबसाइट को जारी रखने में यथायोग्य मदद करें -

-Rajeev Kumar (Editor-in-chief)

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