Imposition of Stamp Duty on Transfer of Securities In DMAT Form In Unlisted Public Companies
Before the recent notification in the Finance Act, transfer of securities in dematerialised form was not subject to any stamp duty. Recent amendment puts an end to any such relaxation.
As we are aware that MCA has made it obligatory for all unlisted Public Companies vide notification dated 10/09/2018 by inserting Rule 9A, wherein every unlisted Public Company is required to dematerialise its shares on or before 02/09/2018. It restricts transfer of physical shares after said date.
Recently, in order to align existing system of Payment of Stamp Duty, the Indian Stamp Act has undergone changes. Now, the Stamp Duty is also to be paid on the transfer of dematerialised shares which was earlier exempted. This notification came to effect on 09/01/2020 as government has inserted ‘Indian Stamp (Collection of Stamp-Duty through Stock Exchanges, Clearing Corporations and Depositories) Rules, 2019‘.
In the matter of dematerialised shares of Unlisted Public Companies, the Stamp duty has to be paid by the Transferor to the Depository. The Delivery Instruction Slip is to carry the amount of Stamp Duty levied on the transfer. It has to be collected on both, delivery and non-delivery basis before the execution of transfer. However, rates are different. The stamp duty, so collected by the depository has to be subsequently transferred to the accounts of the respective State Governments.