TN govt urged to cap stamp duty on M&As

Chennai: The Tamil Nadu government should introduce a ceiling cap on stamp duty with respect to amalgamation or reconstruction of companies, to avoid revenue loss to other states, India’s largest asset backed lender has said.

The state government introduced a tax whereby 2% of the market value of immovable property involved in the transfer or 0.6% of the total market value of shares involved in the transfer. The registration fee on such transactions were fixed as Rs 30,000. The circular and subsequent government orders (GOs) would lead to a situation where the impact of the stamp duty would be enormous in the case of a scheme of amalgamation or reconstruction of large companies having their registered office in the state, who may not have any immovable property or negligible property in the state, DV Ravi, MD of Shriram Capital wrote in a letter to the government.

The letter said that imposing stamp duty where there is either no or negligible immovable property being transferred will place a very high stamp duty burden on companies with their registered office in the state. “This would act as a deterrent for companies which have their registered office in the state from pursuing genuine schemes of amalgamation due to the onerous stamp duty burden. Alternatively, such companies will be forced to look at a change in their registered office outside the state to save on unreasonable stamp duty rates, the letter said.

This may lead to revenue loss for the state, loss in employment if the office gets shifted out, loss in states share of GST paid by these companies and loss of state’s share of Income Tax paid by these companies. Competing states like Gujarat charges 1% of the market value of shares issued capped at Rs 25 crore and Maharashtra has 0.7% of market value of shares issued, capped at Rs 50 crore. Shriram’s Ravi sought amendments which will exclude companies which have no immovable properties or where the immovable properties are less than 10% of the total value of properties transferred. For those which are not excluded he sought a stamp duty cap of Rs 5 crore.


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