Regulator Sebi has directed alternative investment funds (AIF) to appoint registrar to an issue and share transfer agents latest by July 15 to enable collection of applicable stamp duty on sale, transfer and issue of AIF units in accordance with the Indian Stamp Act.
Sebi gave the direction while asking Registrars to an issue and share Transfer Agents (RTAs) to comply with provisions of Indian Stamp Act, 1899 regarding collection of stamp duty on sale, transfer and issue of AIF units, from Wednesday onwards when the provisions of the amended regulation have come into effect.
RTAs who have already been appointed by AIFs shall collect the stamp duty on issue, transfer and sale of AIF units and in cases where AIFs have not appointed RTAs so far, they shall do so at the earliest but not later than July 15 to enable collection of applicable stamp duty, Sebi said in a circular late on Tuesday.
“As the provisions of the amended Indian Stamp Act, 1899 and the Rules made thereunder are to be implemented and enforced w.e.f. July 01, 2020, till such time RTAs are appointed, as an interim measure, AIFs shall keep the applicable stamp duty on issue, transfer and sale of units of AIFs in a designated bank account,” Sebi noted.
AIFs need to transfer the amount to RTAs upon appointment for onward remittance to states or union territories in accordance with provisions of the Indian Stamp Act.
The government in January had notified RTAs to act as depository for limited purposes of acting as a collecting agent under the Indian Stamp Act, 1899.
The finance ministry on Tuesday said states will collect stamp duty at uniform rate on transactions of shares, debentures and other securities from July 1.
With this, the stamp duty will have to be paid by either the buyer or the seller of a financial security, as against the current practice of levying the duty on both.
The present system of collection of stamp duty on securities market transactions led to multiple rates for the same instrument, resulting in jurisdictional disputes and multiple incidences of duty, thereby raising the transaction costs in the securities market and hurting capital formation.
The finance ministry said the move is aimed at facilitating ease of doing business and bringing in uniformity of the stamp duty on securities across states and thereby building a pan-India securities market.