The stamp duty applicable on the execution of agreements and various documents in India is governed by both, the Union Government and the appropriate State Governments. The right to determine stamp duty, and the bifurcation of this responsibility, has been split between the Union Government and the State Government in accordance with the Seventh Schedule of the Indian Constitution. The Union Government, as per Entry 91, List I sets out the rates of the stamp duty applicable for specific documents (such as checks, shares, bonds, etc.), while the State Governments, as per Entry 63, List II, set out the rates of the stamp duty applicable on all other documents not included in List I.
Stamp Duty Framework and the Finance Act, 2019
In the case of companies, stamp duty is payable both on the issuance of new shares, and the transfer of the same. As specified in Entry 91, List I, any document executed with regard to the “transfer of shares” is governed by the Union Government, and consequently, any stamp duty that is payable on a document effecting the transfer of shares shall be determined by the Union Government. In contrast, under Entry 63, List II, the State Government is given the power to impose stamp duty in respect of any documents other than those specified in List I. As the stamp duty for the issuance of shares is not specifically governed by the entries under List I, the State Government would have the authority to levy stamp duty on the issuance of shares.
Due to such decentralized governance, the stamp duty varied significantly across states. On February 21, 2019, the Finance Act, 2019 (“2019 Act“) amended the Indian Stamp Act 1899, i.e. the central legislation governing stamp duty (“Indian Stamp Act“) to centralize the collection of stamp duty for the issuance of shares. Under the 2019 Act, a stamp duty of 0.005% (zero point zero zero five percent) was mandated as a uniform rate for issuance of shares in India to be collected by depositories on behalf of the relevant state government. Consequently, depositories like the National Securities Depository Limited (“NDSL“) and the Central Depository Services (India) Limited (“CDSL“) have been collecting stamp duty at the rate of 0.005% (zero point zero zero five percent) of the value of shares from companies across India.
Circular issued by the Revenue Department of Delhi
On July 29, 2025, the Revenue Department of Delhi issued a circular (“Circular“) informing all relevant stakeholders that the stamp duty payable by any company, having their registered office in the National Capital Territory of Delhi (“Delhi“), on issuance of shares is 0.1% of the share value. This is in accordance with the rate captured by Article 19 of Schedule 1A of the Indian Stamp Act, 1899, as applicable in Delhi (“Delhi Stamp Act“). The Circular also highlighted the constitutional basis for the Delhi Government’s authority to prescribe stamp duty rates for issuance of shares.
The Circular directs all companies (listed and unlisted) having their registered office in Delhi to apply for adjudication of stamp duty on issuance of shares as per the Delhi Stamp Act, irrespective of whether such shares are issued in physical or demat form, and within the stipulated time frame. The Circular further warns that the failure to comply with such directions and the failure to pay the applicable stamp duty may result in penalties.
In addition to the above, the Revenue Department of Delhi on September 29, 2025, by way of a letter addressed to the NDSL and CDSL, raised their concerns that the aforementioned depositories were collecting stamp duty at the rate of 0.005% (zero point zero zero five percent) of the value of shares without having due approval from the Delhi Government. Additionally, they have pointed out that a mechanism has already been put in place for the collection of stamp duty through the Stock Holding Corporation of India Limited (“SHCIL“) from the year 2016 for the issuance of share certificates (whether in physical or demat form).
Issues raised by the Discrepancy
Several writ petitions have been filed in the Delhi High Court raising questions on: (i) the competence of the Union Government and the Delhi Government to levy stamp duty on certain transactions; (ii) the jurisdiction of the Delhi Government to seek out information on instruments where they suspect that the stamp duty is underpaid; and (iii) the retrospective enhancement of stamp duty after payment.
A combined reading of Articles 110, 245, 246 and 248 of the Constitution of India permits the Union Government to regulate taxation and matters incidental thereto, including charging, collection and the procedure for the same. This forms the legislative basis for the Union Government’s competence to legislate through the finance acts. However, the legal issue in this regard would be whether the Union Government has the authority to override the State Government’s limited competence to determine the stamp duty under List II.
Conclusion
Delhi’s Collectorate seems to have taken the view, that 7 (seven) years after the 2019 Act and the consequent amendments to the Indian Stamp Act, an upward correction in the levy and collection of stamp duty is required for past transactions. The Revenue Department of Delhi has been continuing to issue notices for deficits in the payment of stamp duty, and threatening payment of penalties for the failure of the companies to address the same while companies outside Delhi continue to pay stamp duty at the rate of 0.005% (zero point zero zero five percent) of the value of shares. For companies listed in Delhi, the ramifications of such change could be significant, forcing the companies to retrospectively pay stamp duty for transactions. The outcomes of the aforementioned writ petitions could prove pivotal, wielding major repercussions for Delhi-based industries. Nevertheless, definitive resolution is essential to ensure regulatory certainty for companies operating out of Delhi, whether such change is legislative or judicial.
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