Delhi stamp duty on share issue: Paid or unpaid?

On July 29, 2025, the Office of Collector of Stamps, Delhi, issued a circular stating that the stamp duty required to be paid on issuance of shares is 0.1% of the value of shares. This rate is 20 times what companies have been paying thus far. Depositories like the NSDL and CDSL have been collecting stamp duty @ 0.005% of the value of shares from companies across India in accordance with the 2019 Finance Act (amending the Indian Stamp Act, 1899).

Once collected, the depositories are required to hand over the stamp duty to the concerned state’s revenue department. Delhi’s Collectorate seems to have taken the view, seven years after the 2019 amendments to the Stamp Act, that an upward correction in the levy and collection is required for past transactions.

The matter is now reaching the Delhi High Court through various writ petitions, raising important questions on: (i) the competence of the Centre and the Delhi government (GNCTD) to levy stamp duty on certain transactions; (ii) the jurisdiction of the Collector of Stamps, GNCTD to seek out information about instruments where duty is suspected to be underpaid; and (iii) the retrospective enhancement of stamp duty after payment.

Schedule VII of the Constitution divides the power to determine rates of stamp duty for different transactions amongst the Union (Entry 91, List I) and the States (Entry 63, List II).The Union has the power to determine rates of stamp duty on the “transfer of shares” while the States’ authority for this purpose extends to all matters not covered in List I. From a combined reading of Articles 110, 245, 246 and 248 of the Constitution of India, the Union’s power extends to the regulation of taxation and matters incidental to it, including charging, collection and procedure. This forms the basis of its legislative competence with respect to the Indian Stamp Act,1899 and consecutive finance acts.

As such, a legal issue arises as to whether the Union’s broader competence on taxation, including stamp duty, and the securities framework (manifested in the SEBI Act,1992) should override the states’ limited competence on the determination of the rate of stamp duty vis-à-vis certain transactions.

A more practical issue, however, is that the Finance Act, 2019 introduces a uniform statutory framework across the country for the determination and collection of stamp duty on  securities transacted through the depository system. Sections 9A and 9B of the Stamp Act designate depositories as statutory collecting agents and provide a uniform mechanism for computation, collection and remittance of stamp duty to the states. Stamp duty is collected through the depository system in an automated manner when a company seeks to issue shares.

The 2025 GNCTD circular upsets this uniform mechanism by selectively changing the rate applicable to the issuance of shares in Delhi. It also places fetters on the authority of the depositories as collection agents. Following the circular, GNCTD issued a letter dated September 29, 2025 to NSDL and CDSL directing them not to collect the stamp duty under Article 19, Schedule 1-A of the Indian Stamp Act, 1899, and instead identifying only the Stock Holding Corporation of India Limited (SHCIL) as authorised to collect such payment. Apart from upsetting the uniformity of levy/collection introduced by the Centre, it is open to question whether a state-level executive authority can override the law as promulgated by the Centre.

The Stamp Act 1899 does not authorise the Collector to order the production of documents for the purpose of impounding them. This is in contrast to other legislation such as Income Tax Act, 1961, where quasi-judicial authorities are given the power to call for the production of documents.  In particular, the 2025 GNCTD circular calls upon companies to seek “adjudication” of the stamp duty payable by them. The provision of adjudication - Section 31 of the Stamp Act 1899 - in particular, is couched in a voluntary language, such that a person/ entity may come forward to seek adjudication, but cannot be compelled to do so.

The voluntary nature of the provision has also been upheld by the Supreme Court, confirming the fetter on the Collector’s powers to seek production of documents for adjudication. In these circumstances, it will have to be seen whether refusal of companies to produce documents at the direction of the Collector can at all be dubbed as evasive. Indian Stamp Act,1899 contains no investigative machinery akin to Sections 131/133 of Income Tax Act. The Collector’s powers are reactive, not roving.

Finally, it may be contended on behalf of the GNCTD that since the 2001 Delhi amendment to the Stamp Act 1899 (which prescribes the stamp duty rate it now seeks to enforce) has been in force since 2001, its levy is not retrospective. However, this is not a case where companies did not pay any stamp duty at all. To the contrary, stamp duty was collected in full compliance with the provisions of the Finance Act, 2019, which prescribes a duty of 0.005% on the issue of securities other than debentures. The State knew of the collections since 2019 and could have, at best, contested that the levy was improper within Rule 9 of Indian Stamp (Collection of Stamp-Duty through Stock Exchanges, Clearing Corporations and Depositories) Rules, 2019. However, it did not do so.

Today, introducing an upward revision in the levy involves a re-opening of all transactions on which duty has already been paid and is arguably a retrospective action of a fiscal nature, which is prohibited in law as held in Rizvi Builders v. Inspector General of Registration and Controller of Stamps and Another. Any such retrospective enhancement of stamp duty would, in effect, multiply the liability several-fold and impose a substantial additional fiscal burden on companies, in addition to the likely possibility of penalty for previously under-paying the required duty.

Srishti Agarwal is an Associate at Arbridge Chambers & Solicitors.