loader
Close

Search

See all results for ""

Ergo Newsflash

01-Feb-2019

All issuance and transfers of ‘securities’ will be subject to stamp duty (i.e. exemption on transfer of dematerialized securities has been removed

Stamp duty will be calculated on an ad valorem basis on: (i) actual trade price for listed securities; or (ii) price identified in instrument of transfer. More importantly, unified stamp duty schedule across India – not linked to or varied with the state of execution.

  • This would restrict the forum shopping of jurisdictions with favourable stamp duties

On payment of stamp duty on the issuance / transfer of the security, no additional stamp duty payable on any other document entered in connection with such issuance / transfer.

  • Therefore, no separate stamp duty payable on: (a) security subscription / purchase agreements, (b) security certificates, and / or (c) allotment letters.
  • This would greatly reduce costs associated with transactions (especially in high stamp duty states, such as Maharashtra) and ease the execution of documents.

Stamp duty on securities to be collected by stock exchanges / clearing exchange / depositories at the time of the transaction and remitted to applicable state governments. For transactions not on the depositories or on the floor of the exchange, stamp duty must be paid by issuer / transferor (as applicable).

The proposed revised rates of stamp duties are as follows:

Instrument

Stamp Duty Payable

Issuance of debentures (irrespective of whether marketable or not)

0.005%

Transfer of debentures (irrespective of whether marketable or not)

0.0001%

Issuance of securities (other than debentures)

0.005%

Transfer of security (delivery basis)

0.015%

Transfer of security (non-delivery basis)

0.003%

Equity and commodity futures

0.002%

Equity and commodity options

0.003%

Currency and interest rate derivatives

0.0001%

Other derivatives

0.002%

Government securities

0%

Repo on corporate bonds

0.00001%

 

‘Debenture’ has been defined to include bonds / commercial papers and other like instruments has been included in the ambit of ‘debentures’.

Possible Challenges and the Road Ahead

‘Securities’ has been defined to include ‘securities’ as per the Securities Contracts (Regulation) Act, 1956 (SCRA). Since, SCRA does not apply to private companies, it is not clear whether the above changes would apply to the securities of a private company.

Revised provisions are yet to be notified and are subject to requisite rules being passed by the Central Government in relation to the mechanism of collection of tax by stock exchanges / clearing exchange / depositories and transferring the same to the government.

On implementation, this should not only reduce the stamp duty implications in transactions (especially in high stamp duty states), but also simplify deals as stamping of documents is often a gating item for execution / closing.

  • Aakash Choubey (Partner), Deepak Jodhani (Partner) and Kapish Mandhyan (Senior Associate),

For any queries please contact: editors@khaitanco.com

We have updated our Privacy Policy, which provides details of how we process your personal data and apply security measures. We will continue to communicate with you based on the information available with us. You may choose to unsubscribe from our communications at any time by clicking here.

For private circulation only

The contents of this email are for informational purposes only and for the reader’s personal non-commercial use. The views expressed are not the professional views of Khaitan & Co and do not constitute legal advice. The contents are intended, but not guaranteed, to be correct, complete, or up to date. Khaitan & Co disclaims all liability to any person for any loss or damage caused by errors or omissions, whether arising from negligence, accident or any other cause.

© 2019 Khaitan & Co. All rights reserved.

Mumbai

One Indiabulls Centre
13th Floor, Tower 1
841 Senapati Bapat Marg
Mumbai 400 013 India

T: +91 22 6636 5000

E: mumbai@khaitanco.com

New Delhi

Ashoka Estate, 12th Floor
24 Barakhamba Road
New Delhi 110 001 India

T: +91 11 4151 5454

E: delhi@khaitanco.com

Bengaluru

Simal, 2nd Floor
7/1 Ulsoor Road
Bengaluru 560 042 India

T: +91 80 4339 7000

E: bengaluru@khaitanco.com

Kolkata

Emerald House
1B Old Post Office Street
Kolkata 700 001 India

T: +91 22 6636 5000

E: kolkata@khaitanco.com