Mar 13, 2012

Stamp Duty on Share Certificate

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STAMP DUTY ON SHARE CERTIFICATE
This note discusses the issues which have risen due to receipt of notice by companies registered in the National Capital Territory of Delhi, from the Collector of Stamps, Delhi for demand of stamp duty on the share certificates issued by them as per the rates applicable in the National Capital Territory of Delhi.
The basic issues among the Corporate as regards the aforesaid notice are outlined below:
1. Place at which stamp duty is to be levied- Registered Office of the Company or where the Board Meeting for issue of shares is held?
2. Value on which stamp duty is to be charged and paid on issue of share certificates?
Indian Stamp Act 1899 is the parent Act, which was enacted by the Legislature as a fiscal statute, the principal object of which is to secure revenue of the government in form of stamp duty. Our constitution, gave powers in the hands of State Governments to enact laws or make amendments to the Indian Stamp Act 1899 for its application to their respective jurisdictions for the things, documents and instruments executed therein except those for which Union of India was authorized to levy and collect stamp duty.
By virtue of these powers, levy and collection of stamp duty on issue of share certificates falls within the sphere of State Legislature and accordingly many State Governments adopted the provisions of Indian Stamp Act 1899 for its applicability in their region with or without any modification or amendments while others opted for enactment of separate statute governing the levy and collection of stamp duty in there jurisdiction.
For instance, Legislature of National Capital Territory of Delhi and State of Haryana has adopted the provisions of Indian Stamp Act 1899 with modifications and amendments in the Act while Legislature of Uttar Pradesh which earlier adopted the provisions of Indian Stamp Act 1899 but in the year 2010, enacted there separate statute governing levy and collection of stamp duty in its region.
Hence, the levy and payment of stamp duty on issue of share certificates is governed by the provisions of Stamp Act as applicable to the states, where the instrument is first executed, since the subject falls within the State List of Constitution of India.
But however the Collector of Stamps, Delhi has recently issued notices to over 20,000 companies in Delhi calling for stamp duty payment on share certificates issued by them taking a view that stamp duty is to be paid, where the registered office of the Company is situated creating a perplexity in the minds of the Corporate and Legal Professionals as to the real incidence of levy of stamp duty on issue of share certificate.
Moreover the another important issue is the determination of the value on which the stamp duty to be levied i.e. whether it should be the face value or the consideration value which means face value plus premium, if any paid. The Indian Stamp Act in respect of issue of shares in physical form provides for levy of duty on value of shares and where shares are issued on dematerialized form, the duty shall be levied on the amount of securities issued.
So all companies having there registered office in the National Capital Territory of Delhi and who have not paid the duty on share certificates with the Collector of Stamps, Government of Delhi should ensure due compliance of stamp law in order to validate their instruments evidencing the rights and entitlements on the shares contained therein either by making due payment or by taking up the matter with the authority, in case the duty is not levieble in Delhi.
It is to be clarified that all the aforementioned issues shall be determinable in strict interpretation of the law governing the subject matter with due consideration of the facts of each case.
For reference, Rates of Stamp Duty in Delhi, Haryana and Punjab for Certificate or other Document evidencing the right or title of the holder thereof, or any other person, either to any shares, scrip or stock in or of any incorporated company or other body corporate, or to become proprietor of shares, scrip or stock in or of any such company or body is mentioned herein below:
 
Name of the State Article No. for share certificates Rate of stamp duty on issue of Share Certificates Article No. for Letter of Allotment Rate of stamp duty on Letter of Allotment
National Capital Territory of Delhi Article 19 of Schedule I-A of Indian Stamp Act 1899 One Rupee for every one thousand or a part thereof, of the value of the shares, scrip or stock. Article 36 of Schedule I-A of Indian Stamp Act 1899 One Rupee
State of Haryana Article 19 of Schedule I-A of Indian Stamp Act 1899 Forty Naye Paise Article 36 of Schedule I-A of Indian Stamp Act 1899 Thirty Naye Paise
State of Punjab Article 19 of Schedule I-A of Indian Stamp Act 1899 Ten Rupees Article 36 of Schedule I-A of Indian Stamp Act 1899 Fifteen Rupees
State of Uttar Pradesh Article 20 of Schedule to UP Stamp Act 2008 One Rupee Article 37 of Schedule to UP Stamp Act 2008 One Rupee
 
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