Stamp duty exemptions may not be available across the board for all financial assets purchased by Asset Reconstruction Companies (ARCs) from banks if a recent Parliament Panel report is anything to go by.
A joint committee of Parliament that went into Sarfaesi and debt recovery laws amendment Bill 2016 wants the government proposal to provide stamp duty exemption to all financial asset purchases by ARCs be confined to certain specific purposes.
To prevent misuse of stamp duty exemption, the panel has in its report suggested that stamp duty exemption be available only in situations where the exact purpose of acquisition is for “asset reconstruction or securitisation”.
This would mean that ARCs cannot avail themselves of stamp duty exemption where the acquisition is for their own use or their investors’ use. Such a recommendation would also mean that “compromise settlements” – a significant resolution method used in Indian context – may not be entitled for such stamp duty exemptions, says asset reconstruction industry experts.
Commenting on the panel’s recommendation to confine the stamp duty exemption to specific purposes of asset reconstruction and securitisation, P Rudran, former Managing Director and CEO of ARCIL, said this was “a restrictive provision, nevertheless there is lot of substance in what panel has suggested”.
This was not entirely in the spirit of faster resolution of non performing loans, Rudran told BusinessLine .
V Kannan, former Chairman and Managing Director of Vijaya Bank, said that the Joint Committee’s recommendations were in totality a “positive development” for resolution of non-performing loans.
“The panel has sought to prevent misuse of stamp duty exemption which is a welcome development,” said Kannan.
Babu Sivaprakasam, Partner, Economic Laws Practice, a law firm, said the Bill with the clarifications of the Committee intends to put to rest the differential stamp duties applicable on assignment deeds by any bank or Financial Institution in favour of ARC by exempting the stamp duty as various states had issued separate notifications for reduced stamp duty.
Pavan Kumar Vijay, founder, Corporate Professionals, said that the stamp duty exemption is a welcome move and will make this a more viable business for asset reconstruction companies who take over stressed assets from banks.
(Inputs from Surabhi)