Amendments to Maharashtra Stamp Act: An Effort to Increase Revenue

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Amendment to Section 5: The Ordinance has inserted the expression ‘or transactions’ after ‘several distinct matters’ as appearing in Section 5 of the Maharashtra Stamp Act. The Bombay High Court in the matter of Navi Mumbai SEZ Private Limited v The State of Maharashtra & Ors (Writ Petition No. 8014 of 2019) held that the phrase ‘distinct matters’ is equivalent to the phrase ‘distinct transactions’. The amendments brought about by the Ordinance are clarificatory in nature but bring to finality the GoM Circular which was being implemented in an ad hoc manner across the state. This amendment is applicable with retrospective effect and is deemed to be effective since 11 August 2015 (the date of the Coastal Gujarat Judgment). With this amendment, Section 5 of the Maharashtra Stamp Act is in line with Section 5 of the Gujarat Stamp Act – both states are now looking to stamp the underlying transactions instead of the instrument especially in the case of mortgage for multiple beneficiaries.

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Amendment to Article 6 of Schedule I: The Ordinance has increased the stamp duty payable on an agreement relating to deposit of title deeds, pawn, pledge or hypothecation where the amount secured exceeds INR 5 lakh from ‘0.2%’ to ‘0.3%’ subject to the existing cap of INR 10 lakhs. This has been done by amending column (2) of Article 6(1)(b) and Article 6(2)(b). The slight increase in the percentage may not have any material impact for securing amounts of higher loans, since the stamp duty is anyway capped at INR 10 lakhs. Further, sub-clause (3) has been inserted to Article 6 to provide for a stamp duty of INR 500 for an instrument of additional security if executed under Article 6 and if full stamp duty has been paid on the primary security. Accordingly, any instrument providing for additional security in the form of hypothecation or equitable mortgage shall be stamped for nominal amount of INR 500 if full stamp duty i.e., upto INR 10 lakhs has been paid on the principal instrument. This amendment has effectively aligned Article 6(3) of the Maharashtra Stamp Act to Article 40(c) of the Maharashtra Stamp Act, which stipulated nominal stamp duty for mortgage deed for additional security or collateral.

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Amendment to Article 40(b) of Schedule I:  The Ordinance has reduced the stamp duty on a mortgage deed (not being, inter alia, an agreement relating to deposit of title deeds, pawn, pledge or hypothecation (under Article 6)), where possession of the subject property is not given or agreed to be given from ‘0.5%’ to ‘0.3%’ subject to the existing cap of INR 10 lakhs. Again, the slight decrease in the percentage may not have any material impact for securing amounts of higher loans, since the stamp duty is anyway capped at INR 10 lakhs.

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Validation of Proceedings: Clause 4 of the Ordinance specifically validates any actions initiated under the existing Section 5 and Articles 6 and 40 in Schedule I of the Maharashtra Stamp Act. Further, no suit is maintainable for refund of the stamp duty levied or collected.