Govt likely to move towards uniform stamp duty for states
VRISHTI BENIWAL
New Delhi, 15 October
With the Centre planning to table the Indian Stamp ( Amendment) Bill
in the winter session of Parliament, there might soon be a uniform
duty on stock market transactions across the county. To encourage
investment and liquidity in securities, it seeks to allow stock
exchanges to collect stamp duty from sellers, instead of buyers.
The Bill, being vetted by the law ministry, proposes a stamp duty rate
of 0.001 per cent on delivery- based transactions and currency
derivatives, and 0.003 per cent on clearance list, transfer deal and
futures & options.
These rates are higher than the duty currently levied by a major state
like Maharashtra (0.0001 per cent on most transactions) but much lower
than a uniform rate of 0.005 per cent proposed by the state government
two years ago. The new rates have not been notified yet due to
opposition from markets players.
"Currently, many states don't levy stamp duty on stock market instruments.
A uniform duty recovered from sellers will generate volumes,
transparency and check tax evasion. States are on board," a finance
ministry official, who did not wish to be named,
told Business Standard.
In the proposed system, the duty will be deposited to the state where
a seller is based. At present, it varies for different transactions
from state to state. Sometimes, brokers collect the duty on sale as
well as purchase of financial instruments and this leads to double
taxation.
Currently, Maharashtra is the biggest beneficiary, accounting for
about half the revenue collected from stamp duty on stock transactions
annually. Gujarat, Rajasthan, Uttar Pradesh and Delhi are
other major states. Turn to Page 20 >
Bill to amend model law coming in winter session
In the proposed system, the duty will be deposited to the state where
a seller is based
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Govt likely to move ...
Southern states like Andhra Pradesh and Karnataka, which do not levy
stamp duty, might gain in the new system.
All states would get some duty, as traders would not be able to escape
the tax by shifting to a zero- stamp- duty structure, officials said.
While many states have adopted the Indian Stamps Act, some have their
own standalone stamp laws.
These states will have the right to continue with the existing system
and collect different rates than those proposed by the Centre, but the
finance ministry is confident that most states would adopt the model
law, as it was expected to result in buoyancy in revenues due to a
wider tax base.
The Bill also proposes to give power to states to review stamp duty on
mining lease after every 10 years. Currently, there is no such
provision.
Since the Act is over 100 years old, some definitions will be updated
and some terms removed to reflect the current nature of transactions
and the new technology.
Officials said the duty on property transactions would be linked to
the current market rate and states would have the power to revise it
every year. States would also get more teeth to inspect the premises
of builders.
One year validity is also being proposed for stamp papers to address
the issue of forgery, as many people bought backdated papers to stake
claim on a property in future, while no such deal would have actually
happened on that date. Besides, electronic payment of stamp duty might
also be allowed under the new Bill.
The Bill also proposes to increase the penalty with regard to improper
use of stamps. The draft amendment Bill had proposed a rigorous
imprisonment of six months to three years or a fine of up to ₹ 50,000
on a person who tried to defraud the government. According to the
original Act, a fine of only ₹ 5,000 was imposed for an act of fraud.
All states together get about ₹ 60,000 crore from the levy of stamp
duty. The collections have been growing at a rate of 10- 15 per cent
every year and the new law might further enhance that
PREFERENTIAL MARKET ACCESS
Govt reviews home- first policy for e- goods
BS REPORTERS
New Delhi, 15 October
The government has decided to review the proposed Preferential Market
Access ( PMA) policy in electronic goods, which seeks to favour
domestic equipment makers for government procurement.
However, the revised proposal, if accepted, would also not be too
favourable to foreign electronics goods makers.
In a note for the Cabinet, reviewed by Business Standard, the ministry
of communications and information technology has also proposed that
the government approve the part of the policy that reserves 30 per
cent of its procurement for domestically manufactured electronic
goods.
On July 5, the Prime Minister's Office ( PMO) had decided to keep PMA
on hold, following strong protests from international trade
associations. The US- India Business Council (USIBC) and 37 other
associations of foreign telecom firms and electronics product
manufacturers, including entities from across Europe, Australia, Asia
and the US, wrote to Prime Minister Manmohan Singh, protesting at the
draft notification for a PMA policy.
The Information Technology Industry Council, which represents major
foreign technology firms such as Alcatel- Lucent, Cisco, Ericsson and
Motorola, had also opposed the policy.
The cabinet had approved a PMA policy on February 2, 2012, to give
preference in procurement for domestically made electronic products
where there could be security implications for the country and in
procurement for government use.
According to the new ministry note, the extant policy shall not be
applied to electronic products having security implications and a "
separate framework" shall be developed for procurement of these
products. However, all other provisions on procurement of electronic
goods for government use will remain unchanged. The policy will also
apply to the defence sector.
The note argues that PMA was mooted to incentivise domestic
manufacturing in the country, which presently depends on large- scale
imports to meet its demand for electronic goods. The policy is one of
the many initiatives taken by the government in the past two years to
get an electronics manufacturing ecosystem going.
JSatyanarayana, secretary, department of electronics and information
technology, declined to comment on the note but said the government
had stated in the past that the PMA policy would be reviewed.
According to government estimates, India imports about $40 billion of
electronics items.
"We welcome the continuation of the government procurement policy, as
we feel it is important to stimulate the domestic manufacturing
activity," said Chetan Bijesure, director and head of the
manufacturing division at the Federation of Indian Chambers of
Commerce and Industry.
In April this year, the department of telecommunications (DoT) had
written to the PMO that the suggestion of a moratorium on PMA
implementation was similar to a " chicken and egg story", after the
PMO had suggested the issues of security and manufacturing be de-
linked.
The then DoT had said linkage of local manufacturing, development of
intellectual property rights for new technology and security was
justified. Under PMA, there was " no distinction" between an Indian
company and aforeign company and all companies manufacturing in India
are judged on value addition criterion to qualify as domestic, the DoT
replied to the PMO.
Meanwhile, the Department of Telecommunications was planning to add 23
new products in the reviewed list of products that would be included
in the PMA list. The department is expected to add six new products in
the PMA list for government procurement for 2014- 15.
For full reports, visit www. business- standard. com MARKET DEPTH
$40 billion Government estimates of India's electronic items' imports
$300 billion National Electronics Policy's estimate of import by 2020
$400 billionNational
Electronics Policy's estimate of demand for electronic items by 2020
3per cent of telecom equipment used in India are home- made ( as of
2009- 10), says TRAI
Response to strong protests from abroad but recommendation on cards
doesn't propose to change much
25 mn small borrowers' data nowa click away
Credit bureaus collecting details of millions of small borrowers across India
NAMRATA ACHARYA
Kolkata, 15 October
Survarna Saha, a domestic help, is hardly known beyond her
neighbourhood in one of the nondescript localities of Kolkata. Till
recently, her sole documented identity was locked in a carefully
preserved elector's photo identity card.
Today, Sahas details are a click away. No, it's not Aaadhar, the
muchtrumpeted Unique Identity Card scheme that has exposed her
identity beyond her immediate neighbourhood, but a loan from a micro
finance institution ( MFI).
With the credit bureau for microfinance institutions now fully
functional, details of millions of such small borrowers across India
are now being documented. This documentation may become one of the
largest databases in the years to come.
In 18 months time, credit bureaus have been able to gather information
on about 100 million loan accounts of 25 million individual customers
from 42 MFIs, Micro Finance Institutions Network ( MFIN) data shows.
All these loan accounts make agross loan portfolio of ₹ 21,300 crore
as of June 2013, a growth of 17 per cent over 2012- 13.
Notably, West Bengal has the largest branch network of MFIs,
accounting for over 16 per cent of the all- India branch network.
At present, two credit bureaus — Equifax Credit Information Services
and High Mark Credit Information Services — collate data from MFIs.
The data is being used to assess over- indebtedness and instances of
multiple lending among borrowers.
According to Reserve Bank of India ( RBI) norms, not more than two
MFIs or non- banking finance companies should lend to the same
borrower with an individual cap of ₹ 50,000. Thus, between 10 and 30
per cent of the applications get rejected on grounds of default
history, over- indebtedness or multiple- lending, says Samit Ghosh,
founder and CEO of Ujjivan Financial Services.
A microfinance credit bureau helps distinguish between good ( lowrisk)
and bad ( high- risk) borrowers by looking at their professions,
skills, loan, and repayment histories, just like any other credit
bureau.
However, there are a number of challenges in collating data from small
borrowers. While several MFIs submit data to the credit bureaus on a
weekly basis, only a few provide data on a monthly basis, which limits
the scope of the database, according to Ghosh. Again, lack of
uniformity in data structure poses a challenge in the process.
Yet, the biggest challenge in having acoherent database of small
borrowers comes from non- government organisations, credit co-
operative societies and self- help groups (SHGs), which do not furnish
data to the credit bureaus.
"MFIs would capture only a part of the rural finance data. The SHGs
have three times bigger reach than MFIs. That data is completely
missing and there is a big gap," says Ghosh. The MFIN has also written
to RBI, calling for the need to include entities other than MFIs to
participate in the credit bureaus.
The average loan outstanding per client stood at ₹ 8,615 on June 30,
2013, a nine per cent increase over the corresponding year- ago
period. On an average, an MFI branch currently serves 2,671 clients.
The figure was 2,354 in 2012- 13.
West Bengal, Tamil Nadu, Andhra Pradesh, Karnataka and Maharashtra
account for 58 per cent of the MFI branch network in India.
BIG DATA
|Equifax Credit Information Services and High Mark Credit Information
Services are the two credit bureaus that collate data from MFIs |So
far, details of 100 million loan accounts belonging to 25 million
individual customers have been collected |These loan accounts have a
gross loan portfolio of ₹ 21,300 crore as of June |The data thus
collected is used to assess over- indebtedness and instances of
multiple lending among borrowers |West Bengal has the largest branch
network of MFIs, accounting for 16 per cent of the all- India branch
network |The average loan outstanding per client is ₹ 8,615 as on June
30
Within 18 months, credit bureaus have gathered details of 100 mn loan a
--
CS A Rengarajan
9381011200
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times of distress Let us lend support and join for noble cause.
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