Introduction

Stamp duty, a tax levied for registering various documents, plays a significant role in India’s financial landscape.
However, the existing Indian Stamp Act, 1899, has faced challenges with redundancy and non-uniform application.
To address these issues, the Ministry of Finance has introduced the ‘Indian Stamp Bill, 2023,’ seeking to revamp and modernize the stamp duty regime.

Understanding Stamp Duty

Nature of Stamp Duty: Stamp duty is a government tax levied for the registration of various documents, such as agreements and transaction papers, with the registrar.
Tax Calculation: The amount is typically a fixed value based on the document’s nature or a percentage of the agreement’s stated value.

Applicable Documents: Stamp duties are imposed on a range of documents, including bills of exchange, cheques, promissory notes, bills of lading, letters of credit, insurance policies, share transfers, debentures, proxies, and receipts.
Jurisdiction: While levied by the Central government, stamp duty revenues are collected by individual states within their territories, as authorized by Article 268 of the Constitution.

Fiscal Legislation: The Indian Stamp Act, 1899, is a fiscal statute governing the imposition of taxes in the form of stamps on transaction-recording instruments.
Instrument Definition: Under Section 2 of the Act, an “instrument” encompasses any document creating, transferring, limiting, extending, extinguishing, or recording any right or liability.
Stamp Characteristics: A “stamp” is defined as any mark, seal, or endorsement authorized by the State Government, including adhesive or impressed stamps, for the Act’s duty purposes.
Taxable Instruments: Section 3 of the 1899 Act specifies that certain instruments or documents are chargeable with amounts listed in Schedule 1 of the Act, including bills of exchange and promissory notes.

Redundancy and Inoperability: The Ministry of Finance cites the redundancy and inoperability of several provisions within the Indian Stamp Act, 1899.
Lack of Uniformity: The absence of provisions for digital e-stamping and the lack of consistent stamp duty legislation across Indian states necessitate a new law.

Digital E-stamping: The draft Bill introduces provisions for digital e-stamping, enabling electronic payment of stamp duty.
Digital Signatures: It includes provisions for digital signatures, redefining “executed” and “execution” to mean “signed” and “signature,” incorporating electronic records and signatures as defined in the Information Technology Act, 2000.
Penalty Enhancements: The draft Bill proposes increased penalties, raising the maximum penalty from Rs 5,000 to Rs 25,000 for contravention of the law and imposing a daily penalty of Rs 1,000 for repeated offenses.

The ‘Indian Stamp Bill, 2023’ represents a significant step towards modernizing stamp duty laws in India.
By addressing the shortcomings of the existing legislation and introducing digital-friendly provisions, the bill aims to streamline and enhance the stamp duty regime, facilitating smoother transactions and compliance in the country’s financial landscape.