Move to streamline duty collection on securities hailed

Mumbai, Feb 6 (IANS) The budget proposal for streamlining the process of collection of stamp duty levied on securities will fulfil the "ease of doing business" agenda of the government, industry insiders feel.

According to industry observers, the Central government could try for consensus among states for a unified stamp duty rate.

The move might also help cut revenue losses for states where the stamp duty rates are higher, as some brokerage houses have migrated to regions with lower rates. Further, the overall structural cost of the securities market transaction could also come down.

In the Interim Budget, Finance Minister Piyush Goyal said: "Our government had promised last year we will carry out reforms in stamp duty levied and collected on financial securities transactions. I am proposing, through the Finance Bill, necessary amendments in this regard.

"The amendments proposed would usher in a streamlined system. Stamp duties would be levied on one instrument relating to one transaction and get collected at one place through the stock exchanges. The duty so collected will be shared with the states seamlessly on the basis of domicile of buying client."

At present, brokerage houses collect stamp duty and pay it to state governments, making the process cumbersome. Moreover, the differential rates also add to the confusion.

"The proposal is aimed towards increasing the 'ease of doing business' where the stamp duty will be collected in an automated mode at the stock exchange and then disbursed to the states," Ashish Chauhan, Managing Director (MD) and Chief Executive Officer (CEO) of the BSE, told IANS.

On a unified duty rate, Chauhan said the current budget does not have any proposal for uniform stamp duty as it is a state subject. In future, all states may decide on uniformity depending on their comfort levels.

Deepak Jasani, Head-Retail Research, HDFC Securities said: "There's already consensus between the Centre and the states on GST where much bigger amounts are involved. Stamp duty is not a very large amount, getting consensus on this would not be a problem post GST."

"The pan-India uniform rate will be different for different items of transactions like options and futures. In some cases, the rates have been increased by up to 50 per cent. To date, debentures were not covered. Now stamp duty will be levied on issues and transfers of debentures as well. Overall, there will be a small increase in the outgo. It will not have a material impact for small traders but will have some impact on volume traders."

At present, states have different duty rates. On an average, the square-off of stock attracts 0.002 per cent on the value and the delivery-based transaction 0.001 per cent stamp duty in states.

Essel Mutual Fund CIO Viral Berawala said: "In the budget, the Finance Minister presented a proposal to collect stamp duty at one place through the exchanges and share the proceeds with states based on the domicile of buyer."

"This should result in rationalising the costs as well as streamlining the stamp duty process," Berawala said.