The suggestions by Sebi were made to the group in a meeting held in Mumbai on Wednesday. According to sources, Sebi was asked by the group to present its views on the anomalies in the stamp duty structure for transactions and transfer of shares.

The regulator told the group that in the prevailing market conditions an attempt should be made to keep the stamp duty charges at the minimum and also keep it common across the country. In addition to this, stamp duty for demat debt instruments should be exempt fromstamp duty so that trading interest in these instruments can be increased.

Levy of stamp duty is a state subject and, hence, each state has a different stamp duty structure. In other words, a broker pays a different stamp duty charge when undertaking a transaction, from his counterpart in another states. For example in NSE a member in one state pays a higher (or lower) stamp duty on every contract note issued compared with his counterpart in another state.

Rationalisation of these charges has been proposed so that a common uniform rate can be charged. In the absence of this rationalisation, several manipulations also take place as a person may deliberately issue a contract note from a state where duty is lower even although the deal has not been struck in that place. This leads to revenue loss to a state. The other form of stamp duty levy is on the transfer of ownership of a share. This comes into effect when a share is lodged for transfer from one entity to another.

In this case, too, the stamp dutyis levied differently by each state. In the case of equity shares, dematerialised shares are exempt from stamp duty charge. This facility has not been extended to debt instruments. One of the main reason why a secondary debt market has not picked up in the country is the steep and non-uniform stamp duty charges.