The turmoil in the corporate bond market has forced the Maharashtra government to reduce the stamp duty on debt and securities transactions by 95 per cent and on commodities by 90 per cent. It has also brought corporate bonds on a par with government paper.
The stamp duty on corporate bonds will be Rs 50 for a Rs 1 crore (Rs 10 illion) deal or 0.05 paise on a volume of Rs 100. The government on May 10 had imposed a stamp duty of one paise on a deal of Rs 100 worth of corporate bonds.
In other words, it imposed Rs 5,000 stamp duty on a Rs 5 crore (Rs 50 million) deal, which is the minimum lot dealt in the debt market.
The corporate bonds market, however, saw no deals today as the state government's move came after the trading hours ended.
The stamp duty on mortgages has been reduced by 50 per cent. As a result, the duty rate will be Rs 5 for every Rs 1,000 against Rs 5 for every Rs 500 deal. A new concept of investment agreement has been introduced in the Ordinance for real estate transactions.
On equities, the government has refused to budge and has continued with the distinction between delivery and non-delivery based transactions in equities.
The stamp duty for delivery and non-delivery segments will be Re 1 and 20 paise, respectively, for every deal worth Rs 10,000. The government has also made it clear that it will not differentiate proprietary trade from other trades of equities.
In what could be some relief for brokers, the government has clarified that it will not collect stamp duty from brokers who are servicing clients outside the state.
"The broker or the client must have a physical presence in Maharashtra for being liable to pay stamp duty. The government will avoid double taxation and give exemption to those brokers who have already paid stamp duty to other states," a release by the state revenue department said.
The modified Ordinance follows a meeting of the members of the National Stock Exchange, Bombay Stock Exchange and the Fixed Income Brokers' Association with the state revenue secretary.
An Association of NSE Members of India official said some brokers might move court against the Ordinance on stamp duty.
Deena Mehta, managing director, Asit C Mehta brokerage, said in the equity markets proprietary trades would be impacted as they had been brought under the ambit of stamp duty for the first time.
She also said there should also be clarity on how it would be ascertained whether a trade had been executed in Maharashtra or not.
Commodity market dealers also reacted to the imposition of stamp duty on proprietary trades.
"This is likely to stem the trading, as a large part of trading is done through the proprietary traders. It will impact the volumes of day trading as well," said a commodity futures exchange official.
Proprietary trading, along with day trading and arbitrage, accounts for 75 per cent of the volume traded on an exchange.
Besides, over 60 per cent of the total futures trading in commodities is on the Mumbai-based exchanges.
The duty applicable is now Rs 1 per Rs 1 lakh of turnover for all the commodities across the exchanges. Earlier, there were variable duties on different commodities.
For instance, on soya oil the earlier duty was Rs 1 per Rs 10,000 turnover and for gold and silver it was Rs 1 per 1 kg and 50 kg, respectively. The stamp duty on commodities transactions will now be based on value and not weight.
According to Jagdish Jaiswal, manager, Angel Commodities Broking, the uniform concession will encourage higher volumes with people interested in physical delivery participating.
However, with the inclusion of proprietary traders stockbrokers who traded as individual members on the exchanges will be affected.
Bond St cheer
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