Focus: GS-III Indian Economy
Why in news?
The Amendments in the Indian Stamp Act, 1899 brought through Finance Act 2019 and Rules made thereunder will come into effect from July 2020.
Indian Stamp Act
- Indian Stamp Act, 1899 is an in-force Act of the Government of India for the charging of stamp duty on instruments recording transactions.
- The Regulators are: Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) and they have been have been authorized by the Government to issue clarificatory circulars/ operational guidelines on the Amendments made to the Indian Stamp Act.
Need for Amendments to the Indian Stamp Act
- The present system of collection of stamp duty on securities market transactions led to multiple rates for the same instrument.
- This had resulted in jurisdictional disputes and multiple incidences of duty, thereby raising the transaction costs in the securities market and hurting capital formation.
Purpose of amendments:
- The legal and institutional mechanism is in place to enable states to collect stamp duty on securities market instruments at one place by one agency (through Stock Exchange or Clearing Corporation authorized by it or by the Depository) on one Instrument.
- It places a mechanism to facilitate ease of doing business and to bring in uniformity of the stamp duty on securities across States and thereby build a pan-India securities market.
- It also includes a mechanism for appropriately sharing the stamp duty with relevant State Governments has also been developed which is based on the state of domicile of the buyer.
Benefits of the Amendment
- This rationalized and harmonized system through centralized collection mechanism is expected to ensure minimize cost of collection and enhance revenue productivity.
- Further, this system will help develop equity markets and equity culture across the length and breadth of the country, ushering in balanced regional development.