The Commodity Participants Association of India (CPAI) has sought a nine-month extension to the move to collect stamp duty through common agencies like stock exchanges, clearing corporations and depositories.
The move comes into force from July 1.
The proposal to centralise stamp-duty collection through exchanges and depositories was made in the February 2019 Budget and the notification with final guidelines was issued on December 10.
CPAI National President Narinder Wadhwa, in his letter to the Finance Ministry in the second week of June, said that since a majority of staff is working from work from home, and stock exchanges have only recently extended the timeline for compliance with regulatory requirement, an extension till March 1, 2021, was required.
Till now, stamp duty on stock market transactions has been a state subject. Currently, there is a 0.2 percent stamp duty on every trade.
However, Gujarat has recently implemented zero levy of stamp duty on stock exchange members who shift their offices to Gujarat International Finance Tec-City (GIFT).
“This has led to a stampede of stock exchange members shifting their offices from many states like Telangana, Delhi, and West Bengal. The GST collection of these states will be hit since under the Integrated Goods and Services Tax (IGST) rules, the exchanges will raise IGST invoices on the registered offices of the stock exchange members, which will now be in Gujarat,” an official from a broking firm told Moneycontrol.
The proposed system will increase the cost of mutual funds as stamp duty will be levied even on debt schemes and exchange-traded funds. The new regime also takes away the cap on stamp duty from brokers that some states have introduced.
Wadhwa’s letter also said that members are apprehensive that the cost of transaction would go up substantially with the new rates and there is a liquidity crunch in the market.
“Even though relief has been provided to all sections through simpler and lower taxes, the stock market continues to be burdened by non-movable taxes like STT, CTT, stamp duty and capital gains Tax. Even off-market transactions and transactions between relatives will now be taxed, making demat transactions very cumbersome. In the midst of COVID-19, people will have to give small cheques for stamp duty on off-market transfers to their depository participants,” brokers argue.