Cabinet OKs lower capped stamp duty for corporate restructuring

Panaji: The state cabinet on Thursday approved an amendment to the Indian Stamp Act, 1899, to reduce stamp duty payable when the high court or a tribunal passed an order on amalgamation of companies, including subsidiary amalgamation with a parent company, reconstruction, merger, or de-merger, to provide relief to such companies and attract investment in the state.

The amendment provided for levy of stamp duty at 5% on the market value of the property, or on the amount of consideration set forth in the instrument or order, whichever was applicable, subject to a maximum cap of Rs 210 crore, for transfers arising out of Schemes of Arrangement such as restructuring, amalgamation, merger or demerger.

The bill, which will be moved in the ongoing assembly session, seeks to rationalise stamp duty on conveyance with respect to corporate restructuring.

The cabinet said several states prescribed a maximum cap on stamp duty payable on corporate restructuring undertaken through schemes of arrangement, thereby improving the ease of doing business (EoDB) environment and attracting investment.

It said that in states such as Karnataka, Haryana, Madhya Pradesh, Rajasthan and Chhattisgarh, stamp duty was levied either at a prescribed percentage ranging from 1.5% to 5% of the market value of immovable property, or 0.5% to 5% of the aggregate value of shares issued or allotted together with the consideration paid for such transfer, whichever was higher, subject to a maximum cap ranging between Rs 25 crore and Rs 225 crore.

At present, under the Indian Stamp Act, 1899, Goa provided an 80% reduction in stamp duty for transfer of property pursuant to a Scheme of Arrangement in the case of small companies, up to a value of Rs 5 crore, which was still in force. However, there is no specific provision prescribing a capped rate of stamp duty for Schemes of Arrangement exceeding a value of Rs 75 crore, other than the concession provided to small companies.

Representations from the Goa Chamber of Commerce and Industry were examined, the cabinet said.

“It is proposed to introduce a standardised framework for the levy of stamp duty on corporate restructuring transactions undertaken through Schemes of Arrangement, approved by the National Company Law Tribunal under the provisions of the Companies Act, 2013.”

The cabinet said the amendment may result in some reduction in revenue in the short term; however, it was expected to facilitate greater corporate restructuring activity, enhance investment inflows, and contribute to overall economic growth in the state.