MP firms miffed at new stamp duty

The new stamp duty regulations have irked industrialists in Madhya Pradesh, as they will be required to shell out a huge sum of money as stamp duty.

According to the new rules, a company will have to pay 2 per cent of its net worth as stamp duty each time it changes its name or has a new promoter.

If a company, with a capital investment of Rs 500 crore, undergoes a change of name or has a new promoter, it will end up paying Rs 10 crore as stamp duty every time the changes occur, explained an industrialist.

The state launched its New Industrial Promotion Policy 2004 with fanfare to attract industries in a big way. However, the new stamp duty regulations do exactly opposite of the primary objective of the industrial policy, opined another industrialist.

Sunil Chauradia, the chairman of Rajratan Global Wire Ltd, a Rs 50 crore company based in Pithampur, is worried that he will have to cough up Rs 20 lakh in stamp duty for changing the name of his company twice. "Why should the government penalise a company in the form of huge stamp duty when there is only a change in its name, even as the promoters remain the same," questioned Chauradia.

The sale and purchase of shares of companies necessitate a change in the promoters. Should every such occasion lead to an additional payment of stamp duty, he queried.

The new regulations have created confusion among industrialists in the state. About ten companies in Pithampur are faced with the situation of paying additional stamp duty following changes in their names or their promoters.

The rules have also hit companies that are in the process of availing of loans. The new regulations require companies to pay stamp duty on the value of the mortgaged property instead of the earlier practice, where the stamp duty was 1 per cent of the loan amount or Rs 1 lakh, whichever was higher.

The industrialists are concerned that the new rules would hit their plans to float joint ventures with foreign companies, as a joint venture would bring about a change in name of a company and attract additional stamp duty.

"The government should have a positive approach to benefit industries instead of increasing the revenue by levying additional stamp duty. The stamp duty should be levied at rates suited to benefit industries and not to hamper them," stressed Sudhir Mehta, chairman and managing director, Force-Mann.