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Stamp Duty Collection on Sale of Securities made over Stock Exchanges- To be collected by Stock Exchange itself: Effectiveness of the Amendment Postponed.

The Central Government vide the Finance (Amendment) Act, 2019 had amended certain provisions of the Indian Stamp Act, 1899 in February 2019 [ Chapter IV, Part I]. 

One of the amendments included addition of new section “AA” – “Liability of Instruments of Transactions in Stock Exchanges and Depositors to Duty“.

By way of the said amendment, the stamp duty on sale of any securities made through a stock exchange shall be collected on behalf of the State Government by stock exchange itself or a clearing corporation (authorized by the exchange itself) from the buyer on the market value of such securities at the time of settlement of transactions.

Provided before the effect of such transfer, the stock exchange (or the clearing corporation) shall be entitled to deduct such percentage of stamp-duty towards facilitation charges (as may be specified).

Sub-section 3 of the amended section provided for the actions to be taken by the State Government with respect to the subject matter as- 

From the date of commencement of this Part, no stamp duty shall be charged or collected by the State Government on any note or memorandum or any other document, electronic or otherwise, associated with the transactions mentioned in sub-section (1).” 

Therefore, from the date of effect on this concerned new section, the State Government holds no power towards stamp duty collection over sale of securities through a stock exchange.

The amended provisions of the Indian Stamp Act [as laid down in Chapter IV, Part I the Finance (Amendment) Act, 2019] was to come into full force and effect from 1st April, 2020, but the Ministry of Finance vide the notification No. S.O. 1226(E) dated 30th March, 2020 has currently postponed the applicability of the said provision to 1st  July 2020.

Thus, the process of stamp duty collection for securities over stock exchanges will continue to be done by the respective State Government until 1st July 2020.

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