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Context

• The Centre has proposed to replace the existing India Stamp Act, 1899 with the new Indian Stamp Bill, 2023.

What is Stamp Duty?

• A stamp duty is essentially a government direct tax, which is levied to register documents, like an agreement or transaction paper between two or more parties, with the registrar.
• Usually, the amount specified is fixed based on the document’s nature or is charged at a certain percentage of the agreement value stated in the document.
• Stamp duties can be levied on bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts.
• Stamp duties are levied by the Centre, but within the States are collected and appropriated by the concerned States in terms of provisions of Article 268 of the Constitution.
• The Stamp Duty is admissible evidence across all courts and is collected by both Centre and State governments.

What is the Indian Stamp Act, 1899?

• The Indian Stamp Act, 1899 is a fiscal or money-related statute that lays down the law relating to tax levied in the form of stamps on instruments recording transactions.
• Under Section 2 of the Act, an instrument includes every document by which any right or liability is or purports to be, created, transferred, limited, extended, extinguished or recorded.
• Meanwhile, a “stamp” has been defined as “any mark, seal or endorsement by any agency or person duly authorised by the State Government, and includes an adhesive or impressed stamp, for the purposes of duty chargeable under this Act”.
• Section 3 of the 1899 Act prescribes that certain instruments or documents shall be chargeable with the amount indicated in Schedule 1 of the Act. These include bills of exchange or promissory notes.

What is the need for a change in the law?

• The existing stamp duty law is very old and does not capture modern instruments such as digital signatures and e-stamping across the states, leaving room for litigation and confusion.
• Moreover, newer financial instruments in the digital space are also not captured under the existing law.

How is new law different from existing law?

• The existing stamp duty law was enacted in pre-colonial times. The law was amended from time to time, but it still does not accommodate new financial instruments for transactions and features like digital signatures and e-stamping.
• However, the new draft bill has a well-defined provision for electronic stamps, digital signature and a framework for digital record.

Key changes proposed by the new Bill:

• The Bill has provisions to empower the states and the Centre to introduce new instruments for levy of stamp duty from time to time. 
• The bill proposes the withdrawal of duty exemption for ships and vessels.
• The draft bill has a provision to revise the way market value is determined in case of lease for transfer of property rights and mining lease.
• The new bill also provides for a simplified stamp duty in case of special economic zones (SEZs), and also lists exemptions and calculation of valuation. 
• As the Article 370 providing for special treatment for Jammu and Kashmir has been abrogated, the new bill also talks about revision of stamp duty regime the state.
• The bill has increased the monetary threshold for issuing revenue receipt to Rs 1,000 from Rs 20. 
• Collector's application fee has also been enhanced to Rs 1,000 which was previously just Rs 5, in the draft bill.
• The bill proposed to raise the penalty amount from Rs 5000 to Rs 25,000 for not paying Stamp Duty.
• The proposed bill also has provisions to check if properties are undervalued. It also seeks to remove the time limit of the enquiry.
• The draft Bill has introduced provisions for digital e-stamping. “Electronic stamp” or “e-stamp” means an electronically generated impression denoting the payment of stamp duty by electronic means or otherwise, according to Section 2 (18) of the Bill.
• There are also provisions for digital signatures. Section 2 (17) of the Bill states that the words “executed” and “execution”, used for instruments, will mean “signed” and “signature” and include attribution of electronic records and electronic signatures, as defined under the Information Technology (IT) Act, 2000.
• The IT Act defines “electronic records” as “data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated microfiche.” Meanwhile, digital or electronic signature refers to the authentication of any electronic record by a subscriber through an electronic method or procedure.
• The draft Bill also proposes to raise penalties. It seeks to increase the maximum penalty amount from Rs 5,000 to Rs 25,000 for contravening any provisions of the law and impose Rs 1,000 per day for repeated offences.

What will be the impact of the proposed changes?

• The proposed amendments will enhance the ease of doing business by removing the obsolete law. It will also enhance the fee in sync with modern valuations which will bolster revenues of the states.

PRACTICE QUESTION Q. Consider the following statements: 1. Stamp duty is essentially a government direct tax levied and collected by the Central Government. 2. The specified amount for stamp duty is generally fixed based on the nature of the document or a percentage of the agreement value mentioned in the document. 3. Stamp duty is admissible evidence in courts. How many of the above statements are correct? A. 1 only B. 2 only C. All D. None Answer B. 2 only Explanation: Stamp duty is levied by the central government but is collected and appropriated by the concerned states. The statement is incorrect as it is not collected by the Central Government but by the respective states. The specified amount for stamp duty is generally fixed based on the nature of the document or a percentage of the agreement value mentioned in the document. This statement is correct. Stamp duty is often calculated based on the nature of the document or as a percentage of the transaction value. Stamp duty is admissible evidence in courts, as mentioned in the provided information. This statement is correct. Stamp duty serves as evidence in legal proceedings. Therefore, only statement 2 and statement 3 are correct.