Will States Heed Centre's Call to Reduce Stamp Duties?
Real estate firms cite surge in revenues for Maharashtra after duty cuts
Stamp DutiesReal EstateMaharashtraProperty TransactionsGoods And Service TaxReal Estate MaharashtraJul 30, 2024
Many industry executives and policy watchers cite the example of Maharashtra, which saw a rise in revenue after reducing stamp duties during the pandemic. The lower rates boosted property transactions, and the state's revenue collection increased. However, states are cautious about reducing stamp duties, fearing a decline in their revenue and fiscal autonomy.
Stamp duties, levied on the transfer or registration of deeds and financial instruments, are a significant source of OTR for states. In the last five fiscal years, an average of 10.6% of states' OTR came from stamp duties/registration fees. The Constitution empowers the Union government and states to legislate provisions regarding stamp duties as per their competence, under the Union and State Lists in the Seventh Schedule.
According to sources, the finance minister's advice to states that are charging high stamp duties to cut the levy is going to be difficult due to various complexities involved in the process. The stamp duties vary significantly across states, with some even maintaining different levies for men and women.
Industry experts agree that reducing stamp duties could boost property market transactions by enhancing purchase activity and better compliance of property title registrations. However, states might need some fiscal support in lieu of foregoing significant revenues from these taxes. Implementing rate cuts for some sections of consumers, particularly women, would help the cause of women empowerment, as property ownership among Indian women remains extremely low.
Some experts suggest that a more specific direction from the Centre, like 0% stamp duty for affordable homes, would have made more sense. A 3-5% reduction in stamp duty for a specified period would have also helped. Maharashtra's example could be replicated by other states, as the fear of losing revenue went away, and the collection had risen due to higher transactions.
Frequently Asked Questions
Why are states hesitant to reduce stamp duties?
States fear revenue loss and erosion of fiscal autonomy, as stamp duties are a major source of own tax revenues (OTR) for them.
What was the outcome of Maharashtra's stamp duty reduction?
Maharashtra saw a rise in revenue after reducing stamp duties during the pandemic, as the lower rates boosted property transactions.
What is the significance of stamp duties in states' fiscal management?
Stamp duties are a significant source of OTR for states, and their importance has increased after state VAT/sales tax was subsumed in the Goods and Service Tax (GST) seven years ago.
How do stamp duties vary across states?
Stamp duties vary significantly across states, with some even maintaining different levies for men and women.
What could be the outcome of reducing stamp duties?
Reducing stamp duties could boost property market transactions by enhancing purchase activity and better compliance of property title registrations.
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