This would not only help the state boost its pro-business image, but also arrest flight of brokerage firms to places like Mumbai that offers voluminous trade opportunities, or Gujarat where brokers domiciled in the Gujarat International Finance Tec-City (Gift City) are reimbursed the duty.
If Bengal reinstates the cap — which was in place until a recent notification on levying the duty centrally and uniformly — it would help the state also attract stockbrokers from other parts of the country, helping boost its GST and duty proceeds, they said.
“In addition to retaining the cap on proprietary transactions, if Bengal decides to levy a cap of around Rs 3,000 per day on client trades too, it will prod foreign institutional investors to choose Bengal as their registered office,” said East India Securities director Vivek Agarwal.
“Since most of these FIIs have large volumes, the proposal will further increase Bengal’s collection of levies. Additionally, the visibility it brings to Bengal and employment opportunities it would create will be bonus points,” he added.
Stamp duty has always been a state subject. States used to levy and collect stamp duty by themselves or through agencies appointed by them. However, the February 2019 budget proposed that stamp duty on all security and commodity transactions across India be charged at a uniform rate and collected centrally by exchanges and depositories with effect from July 1, 2020. While this has been notified, there are provisions for states to set their own duty rates.
The new centralised levy has increased the liabilities of stockbrokers in states like Bengal, Haryana and Telangana by 20-35 times from July 1, 2020.
Under the new scheme, stamp duty liability for proprietary trades and client trades is Rs 1,500 per crore on delivery of shares and Rs 300 per crore if the transaction has been squared. According to the stock member’s association, “Bengal can continue with the central rates, subject to a cap of Rs 1,500 per member per day.”
Having a centralised system operated by New Delhi puts West Bengal at a disadvantage as it becomes strait-jacketed and loses its flexibility to set rates and caps conducive to the state’s revenue inflows from levies.
Also, a majority of Bengal’s brokerage firms will find it difficult to relocate offices and their families to Mumbai or Gujarat as it would entail huge capital investment.
Setting up an office in the Gift City is not an easy task, Dayco Securities director Ashis Nundy said. “Apart from the cost one incurs to buy office space as per the guidelines laid by the Gujarat government, overhead expenses on hiring of trained manpower and setting up IT infrastructure, brokerage firms with high turnover alone can achieve break even,” Nundy said.
The Kolkata-based firm is one among three Bengal firms to have opened an office in the Gift City.
Broking community has appealed to the Inspectorate General of Stamps and Registration and the state’s finance, commerce & industries minister Amit Mitra to reinstate the earlier stamp duty cap of Rs 1,500 per entity per day in the central scheme so far as West Bengal is concerned.
According to Agarwal: “If our proposal gets accepted, members here would remain competitive vis-a-vis Gift City. If Gift City’s move does not disturb uniformity, Bengal’s step will not either.”