Relevant Date: 21st February 2019

Introduced by: The Finance Act, 2019

Instruments chargeable with duty for transactions in stock exchanges and depositories.

Insertion of New Part AA in chapter II of the Principal Act

Part AA is all about the liabilities of Instruments of Transactions in stock exchange and depositories to duty.

Instruments chargeable with duty for transaction in stock exchanges and depositories

New Section 9A

1. As per the notwithstanding anything contained in this Act-

 Stamp duty on every sale of securities

When the sale of any securities, either delivery based or in any other mode, made through a stock exchange, the stamp duty on each sale of such securities in the clearance list shall be, collected on behalf of SG by the stock exchange or  a Clearing Corporation from buyer on mkt value of such securities at the time of settlement of transaction in the securities of such buyer, in such  manner as may be prescribed the CG.

Where transactions in securities is made by the depositories

Where any transfer of any securities  for a Consideration, whether delivery based or otherwise is made by the depositories, the stamp duty at value of consideration on such transfer shall be collected on behalf of SG by the depositories, in a manner as prescribed by the CG.

In case of change in the record of depository

When due to issue of securities in case of creation, or change in the record of the depositories , the stamp duty on the allotment list shall be collected on behalf of the SG by the Depositories from the issuer of the securities on the total mkt value of the securities as contained in such list, in such manner as may be prescribed by the CG.

Rate of Stamp Duty

Notwithstanding anything contained in the Act, the Instruments refered in Clause (1) shall be chargeable at the rate mentioned in the Schedule I of the Act, and the instruments need not to be stamped.

What Is new on commencement of Part AA?

On commencement of this part no stamp duty shall be collected by the State Government on any document,  Memorandum as mentioned in the Clause (1)

Stamp Duty where to be paid?

The stock exchange or a clearing corporation authorized by the the Stock exchange or the depositories as the case may, shall within 3 weeks at the end of every month , in consultation with the SG shall transfer the stamp duty collected on behalf of the SG-

  • To the SG where the residence of the buyer is located,
  • In case of the residence of the buyer is outside India, then to the SG having the registered office of the trading member, broker of such buyer,
  • Or in such case no trading member of the buyer, to the SG having the registered office of the participants.

Report to Central Government

The Stock exchange, clearing corporation and depositories shall submit to the Central Government the details of transaction as mentioned in clause (1) in such manner as the CG prescribed.

Section 9B

Section 9B talks about the Instruments chargeable with duty for transactions otherwise than through stock exchanges and depositories

This section has the overriding effects in this Act,

As per this section where any issue of securities is made by a issuer otherwise than through a stock exchanges or depository, the stamp duty on each such issue of securities shall be payable by the issuer, at a place where the registered office of the company is situated.

The stamp duty shall be paid on the total market value of the securities so issued.

Where any sale or transfer or reissue of securities for consideration is made otherwise than through a stock exchange or depository, the stamp duty on each such sale or transfer or reissue shall be payable by the seller or transferor or issuer, as the case may be, on the consideration amount specified in such instrument at the rate specified in Schedule I.’.

New Section 62 A

Section 62A talks about the penalty for failure to comply with provisions of Section 9A

Any person

Sr. No Type of default Penalty
1 under section 9A(1), being required to collect duty, fails to collect the same, or Shall be punishable with fine which shall not be less than one lakh rupees, but which may extend upto one per cent. of the collection or transfer so defaulted.
2 Under section 9A(4), being required to transfer to the SG within 15 days of the expiry of the time specified therein, fails to transfer the same.

Any person

Sr. No Type of default Penalty
1 under section 9A(5), being required to submit details of transactions to the Government, fails to submit the same; or Shall be punishable with fine of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less.”.
2 submits a document or makes a declaration which is false or which such person knows or believes to be false.

New Section 73 A

Power of Central Government to Makes rules

For carrying out the provisions of Part AA of Chapter II, The Central Government may, by notification in the Official Gazette, make rules.

The Central Government may make rules for all or any of the matters namely;

  • the manner of collection of stamp-duty on behalf of the State Government by the stock exchange or the clearing corporation authorised by it,
  • the manner of collection of stamp-duty on behalf of the State Government by the depository from the transferor
  • the manner of collection of stamp-duty on behalf of the State Government by the depository from the issuer
  • the manner of transfer of stamp-duty to the State Government
  • Any other matter which has to be, or may be, provided by rules.”.

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