Stamp it Out

However radical it may appear, there is nothing airy-fairy about the idea of banning stamps. North Block has a live example before it, that too right here in India.

Karnataka, the home state of the main perpetrator of the scam, Abdul Karim Telgi, is appropriately the first one to try this reform. With effect from the current financial year, that is from April 1, 2003 onwards, the Karnataka government has dispensed with stamp papers. They have been replaced by plain paper.

You can now, for instance, buy a flat or a plot there by executing the sale deed literally on plain paper. True, these may not be any plain pieces of paper. They have to be what are supplied by the state as ‘‘special document sheets’’, which have the state emblem printed on them. Each is sold at a nominal price of Rs 2.

Elsewhere in the country, for the same transaction, you would have had to buy the usual ‘‘non-judicial stamp papers’’ equivalent to the prescribed stamp duty running into lakhs of rupees.

But then the abolition of stamps does not mean that Karnataka has forsaken the revenue that normally accrues from their sale. On the contrary, this progressive state has devised a system that promises to enhance its revenue from this source.

Since it has done away with stamps, it has all but eliminated scope for any fake stamps to rob the government of its due. Every penny of stamp duty is designed to go to the Government — but how?

The Karnataka Stamp Act, 1957, has been amended to enable payment of stamp duty by demand draft, pay order or at banks through challans. The amendment enacted in 2002 allows one to execute any instrument or document on plain paper and pay the requisite stamp duty separately.

One is then given a receipt resembling a cheque leaf. And on the production of that receipt, the sub-registrar signs and registers that document.

Since this bold experiment is only a few months old, it has had its share of teething problems. The Karnataka government refined the system as it went along.

Initially, there was much chaos as evident from long queues in Bangalore for special document sheets. It took a while for the government to streamline their supply.

Besides, it set up franking machines at all sub-registrar offices, where property transactions are registered, and in designated banks. Those machines are used to frank stamps of any denomination on documents.

The government is also planning to introduce state-of-the-art tax meters. ‘‘People of all walks of life have taken very easily to the new system as it is more transparent and user-friendly,’’ says former Karnakata inspector general of registration and commissioner of stamps K. Satyamurthy, who played a vital role in ushering in the changes.

There is no reason why the reforms made by Karnataka in its stamp law cannot be replicated by other states. Fortunately, the Gujarat and Delhi governments are said to be examining the Karnataka model. States have a vital stake in carrying out these reforms because the entire proceeds of stamp duty go to them. Each gets from this source whatever it collects locally.

But the printing of stamp papers is done by the Centre. In fact, it is done at the very two mints — in Nashik (see accompanying story) and Hyderabad – where the Centre also prints currency notes. That perhaps explains the Centre’s muddled thinking, one which is making it contemplate more security features for stamps rather than encouraging more states to follow the example of Karnataka.

The Centre is also perhaps being unduly defensive in this regard because Telgi began his whole stamp racket by obtaining dyes and other material from the Nashik press.

The efficacy of the Karnataka model is evident from this paradox between stamps and currency notes. When it comes to dealing in currency notes, people are encouraged to resort to alternatives: cheques, demand drafts, credit cards, debit cards and there is even a law in place for e-commerce.

For all high-value transactions, the law in fact requires the payments to be made through cheques.

But, barring Karnataka — and to some degree Maharashtra (see accompanying story) — no alternatives whatsoever have been provided, let alone stipulated, in regard to stamps. It is as if stamps have somehow been taken to be more sacrosanct than even currency notes.

One doesn’t have to look beyond the shores to appreciate the irrationality of this situation. Karnataka has shown that stamps are as replacable as currency notes. It took the lead as the stamp racket was first busted there in 1998.

The rest of the nation has since woken up to the ramifications of the stamp scam. It is an opportune time to rationalise — or modernise — the stamp law and practice across the country. A new economy needs new mechanisms of business transaction.

— with inputs from Ramu Patil