Shares, M&A deals to get costlier due to new levy

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New Delhi, Feb 4: Purchase of listed shares and mergers & acquisitions is set to get a tad expensive, with the government proposing to bring all transactions within the ambit of the amended Indian Stamp Act in the interim budget as part of a revamp of the 120-year law, which was seen to be ridden with loopholes.
The reforms, which are part of the Finance Bill moved by Piyush Goyal have sought to bring transactions involving demat shares, which were hitherto exempted from payment of stamp duty, as well as derivatives within ambit of the law, while also centralising several functions. So far, demat shares are exempted from stamp duty, while those in physical form attract a levy. Even in case of M&As, where shares were transferred through depository slips, there will now be a levy.
Under the proposed centralised collection system, stock exchange or depositories will collect the stamp duty on sale or transfer of securities and then transfer the money to states. “This will result in a lot of efficiency in the entire process of collection of stamp duty and reduce instances of evasion across the country. It will have a positive impact on the stamp duty collection across the country,” said Anshul Jain, partner at consulting firm PwC.
Market players said there was widespread evasion in several states, which will now be checked. At the same time, stamp duty rates for issuance of shares and debentures have been reduced to a large extent, although exemption available to non-marketable debentures and debentures issued after a mortgage deed has been taken away.