Thursday, July 21, 2016

The Age-Old Indian British Legacy: The 'Indian Stamp Act' Still Oppressing The Cirizens


The tragedy is that brown sahibs that took over from Brits accepted not just their laws and systems but also their motives and attitudes.

Most adults accept the inevitability of death and taxes. In India, however, we have also accepted that it's not just taxes but also their mode of implementation and administration that cannot be changed regardless of how archaic, citizen-unfriendly and vulnerable to fraud and corruption they may be.

A case in point is the Indian Stamp Act, 1899. Any citizen who has bought or sold property knows that the instrument detailing the transaction has to be recorded on "stamped paper" of some particular denomination.

In the normal course, the acquisition of the required stamped paper involves the payment of a premium, and if one insists on not doing so, the paper is simply not available.

The story began in 17th century Holland where some bright spark looking for new sources of tax revenue came up with the idea of a tax on commercial and other "instruments", viz documents recording some "transaction".

The Brits copied the Dutch and also brought the notion to India promulgating Regulation VI of 1797 applicable to a limited geographical area.

The idea was extended, became the Stamp Act of 1860 and finally became the Stamp Act of 1899, which forms the law today.

Implementing this idea was simplicity in itself. For a specified instrument - say a sale deed of a house - to be "acceptable" to the organs of state, judicial and administrative, it should be on "stamped paper".

Either adhesive stamps of the requisite value printed by and purchasable from the state could be affixed on the instrument, or the instrument itself could be made on "stamped paper" also printed and purchasable from the state.

Given the "extractive" nature of the colonial state and its modern successor, a black market in "stamped paper" was inevitable; given our entrepreneurial skills, multiple initiatives in forgery of stamped paper were also inevitable.

More than 200 years have passed since Regulation VI of 1797.

New payment options have emerged as the Indian economy has grown and developed, but the taxation of "instruments" and the mode of payment have not changed.

The sheer inertia of the state is remarkable, especially in matters that might perhaps help make a citizen’s life a trifle easier and reduce the hassle of complying with state requirements.

Our colonial masters came to trade and overstayed to rule - the objective was profit and so one cannot really ask for "customer care" to be a major motivating factor behind their policies.

The tragedy is that the brown sahibs that took over from them apparently accepted not just their laws, procedures and systems, but also their motives and attitudes.

Witness the continuity in matters of governance, of which the Stamp Act is but a small example. (This is not to say that nobody has said any of this before or made suggestions for improvement.)

An institution no less than the Law Commission of India in its report number 231 of August 2009 had recommended changes in the Indian Stamp Act 1899 and the related Court Fees Act 1870 that needs to be quoted in full:

"We strongly are of the view that in order to save the government huge costs of printing judicial and non-judicial stamps and commission to stamp vendors as also to prevent fraud and avoidable hassles to the public, the Indian Stamp Act of 1899 and the Court Fees Act 1870 need suitable amendments to provide for payment of stamp duty on instruments and court fee on documents to be filed in courts through alternative mode of payment, namely, demand draft, banker’s cheque , pay order, money order, postal order, challan, cash. Stamp duty and court-fee amounts should also be in round figures."

The recommendation has been "on file" for almost six years now. The annual report of the ministry of finance (Budget division) 2014-15 says in chapter III that:

"A comprehensive Review of Indian Stamp Act, 1899 has been undertaken. Consultation with State Governments and Central Ministries is complete. The draft of the Bill will be sent shortly for vetting to the Ministryof Law & Justice."

If the government is indeed considering a "comprehensive review", it is the appropriate time to address the state - both the executive and the legislature - to overrule the vested interests of the printers, vendors, black-marketers and forgers and keep the interest of the citizen and the recommendations of the Law Commission in mind while finalising the new Stamp Act.

It is perhaps too much to ask that a rationalisation of the tax structure as a whole be attempted and we make a serious attempt to throw off the colonial legacy of an ad-hoc patchwork of taxes and levies and implement a simple, user-friendly structure.

This, however, will require a change in the mindset of the ruling elite. But where in recorded history have rulers ever learnt to serve?

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