PC Agrawal (PCS) 21 February 2012

Revenue stamps on share certificates?

Dear friends,

Stamp duty has to be paid on share certificates as per State Stamp Act. In Maharashtra, Section 11 of Bombay Stamp Act permits payment of stamp duty on share certificates by way of adhesive stamps also. As per Rule 3 of Bombay Stamp Rules 1939, stamps issued by the State Government for the purpose of the Act have to be used. In practice it is seen that companies are using revenue stamps on share certificates where value of duty is not high. A sheet of stamps is also attached to certificates in case of need.

However, in one of the cases the Department has raised objection saying that revenue stamp cannot be used on share certificates, reason being that revenue stamp income goes to Central Government whereas stamp duty on share certificates is a State subject and hence only stamps issued by the State Government should be used.

Members may kindly give their views in the matter.

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2 Replies

R V Pore (Company Secretary in practice) 24 February 2012

On a plain reading of Rule 3 (1)(i) of the Bombay Stamp Rules, 1939 one can conclude that the stamps issued by Maharashtra Govt. only can be used for share certificates. However many companies including big names like Reliance have been using revenue stamps on share certificates for so many years.

It is hard to believe that Maharashtra Govt. have been overlooking this misuse of the revenue stamps and the resultant loss of revenue for so many years and has never issued a clarification or prosecuted any company for violation.

Thereby one can deduce that there must be an internal arrangement of revenue sharing and the use of revenue stamps on share certificates must be valid.

sankaranarayanan.k (Audit Officer) 10 March 2012

Dear friend/members,

The point put forward that revenue stamp income goes to Central Government is not correct. As the State gets the power to levy stamp duty from the Constitution of India. As per the Constitution though the Central Government has the power to prescribe the rates of stamp duty in certain cases, the State government is empowered to levy/collect and appropriate the revenue. Just as in the case of Central Sales Tax.