Move Against Levy Of Double Stamp Duty At Nse

Banks and financial institutions have decided to take up on a war footing the issue of double stamp duty levied on trades conducted on the National Stock Exchange (NSE) with Sebi.

Senior bank officials said banks had earlier taken up the problem with the NSE but without any results. However, NSE officials maintain that the waiver of the duty would have to come from Sebi as the bourse is merely following Sebi regulations. The NSE contends that the document is a record of transactions contracted and thus gives rights to the concerned parties. Hence, they should be stamped. As per NSE regulations, trading members are required to issue contract notes to their respective principals. Thus, for each transaction, two contract notes are issued. Since the NSE is not keen on solving the problem and has not forwarded the matter to Sebi, few nationalised banks are taking up the issue with the market regulator, said a senior official with a southern nationalised bank.

 

Sebi guidelines are not a statute but can be modified and made investor friendly, he added. Issuing of two contract notes for each transactions generated as per NSE regulations will add to the costs as both the notes have to be stamped. This reduces the net income of the seller and adds to the purchase price for the buyer. Moreover, there is disparity in stamp duties in states. Compared to several other states, the stamp duty in Maharashtra is on a higher side.

Further, the contract note does not give additional protection in the event of breach of contract as it is issued by a trading member (broker) to its client.

Even in the case of consortium lending, only one set of documents is executed by the borrowing company for the total credit. Each consortium lender keeps a copy of the original loan document, says a bank official. Bank officials offer three possible solutions: a) The dual duty should be removed; b) Only one document should be generated; c) Contract notes should offer protection in the event of breach of contract. Stamp duty for whole sale debt instruments other than gilts like commercial paper (CP); certificate of deposit (CD) trades on the NSE attracts a stamp duty of 10 paise per Rs 100 or part thereof. This means that a CP or CD instrument with face value of Rs 5 crore will attract a stamp duty of Rs 10,000 (Rs 5,000 + Rs 5,000), apart from brokerage. As against this, for transactions related to government securities there is a ceiling of Rs 1,000 on the stamp duty irrespective of the value of trade.