SEZs Run into Stamp Duty Wall

June 10, 2008	(Be the first to rate this story!)  Loading ...
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Special economic zones (SEZs) could be in for some tax trouble from the states. States have questioned the stamp duty exemption given by the Centre under the SEZ Act.

Some state governments have objected to the Centre’s power to provide such a tax sop, and termed the move to exempt stamp duty under the Indian Stamp Act as ultra vires. The finance ministry is now proposing to elicit law ministry’s views on the issues raised by states, official sources told ET.

The issue had also figured at the meeting of the state tax secretaries and finance ministry representatives that was held on May 26.

States have alleged that while the Centre had the power of legislation, the power to fix rates lay with the states. Orissa government had taken up the issue initially with the Centre, but now states like Madhya Pradesh have also joined in.

Sources point out that the Centre, in a bid to bring about unification of duties, has linked the funding under Jawaharlal Nehru National Urban Renewable Mission (JNNURM) to the reduction in stamp duty by states.

They said, if the Centre had powers to reduce stamp duties, it could have done it at one go and not gone through such a long process under JNNURM. “The reduction in duty is ultra vires of the provisions of the Indian Stamp Act,” an official said.

“Parliament can make law in respect of stamp duty. It can prescribe rates of stamp duty. The stamp duty rates prescribed by Parliament in respect of bill of exchange, cheques and transfer of shares will prevail all over India. However, other stamp duty rates prescribed by Parliament in Indian Stamp Act, 1899, (eg stamp duty on agreements, affidavit, articles of association of a company, partnership deed, lease deed, mortgage, power of attorney and security bond) are valid only for Union Territories. In case of states, the rates prescribed by individual states will prevail in those states,” the Act states.

But, in case of a dispute between the state law and the Union law, the Act provides, “if there is conflict between state law and Union law, the Union law prevails (Article 254 of Constitution).”

The law ministry’s views could be taken on whether this provision also empowered the Centre to change the stamp duty rates in a state through legislation.

The stamp duty rates prescribed by Parliament in respect of bill of exchange, cheques and transfer of shares will prevail all over India. However, other stamp duty rates prescribed by Parliament in Indian Stamp Act, 1899 (e.g. stamp duty on agreements, affidavit, articles of association of a company, partnership deed, lease deed, mortgage, power of attorney and security bond) are valid only for Union Territories. In case of states, the rates prescribed by individual states will prevail.

If there is conflict between state law and Union law, the Union law prevails (Article 254 of the Constitution) now, the law ministry’s opinion may be sought on whether this provision empowers the Centre to change the stamp duty rates in a state through legislation.

News Published Under:   Real Estate India, Special Economic Zones |

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