The Gujarat Stamp (Amendment) Act, 2025 ("Amendment Act"), amends the Gujarat Stamp Act, 1958 ("Principal Act"), marking a significant reform in the state's fiscal governance. This legislation responds to the evolving dynamics of corporate and real estate transactions, introducing robust mechanisms to enhance compliance, streamline processes, and align with modern commercial needs. Through this article, we have discussed major reforms brought in by the Amendment Act which impact the stakeholders at large and their probable consequences.
Expanded Definition of Conveyance
A key amendment to Section 2(g) of the Principal Act broadens the definition of "conveyance" to explicitly include instruments related to mergers, amalgamations, demergers, reconstruction, and any agreement for takeover of the management or control of a company by transferring or purchasing the shares of a company.
The insertion of sub-clause (vi) in Section 2(g) of the Principal Act now distinguishes any agreement for takeover of the management or control of a company by transferring or purchasing the shares of a company from an ordinary share purchase agreement which continues to be governed by Article 5 of Schedule I of the Principal Act. Share purchase/ subscription, share transfer or management takeover agreements effecting a change of control of a company are now classified as "instrument of conveyance", attracting higher stamp duty basis transactional value under the revised framework.
This reclassification increases the fiscal burden on stakeholders while, inter alia, undertaking an acquisition or shares subscription transaction, resulting into change of control of a company. Stakeholders must now carefully evaluate deal structures to mitigate the elevated stamp duty liability, potentially impacting the cost-effectiveness of such transactions in Gujarat.
Strengthened Enforcement Mechanisms
The amendment to Section 2(l) which defines the term "instrument", and Section 3 of the Principal Act encourages payment of stamp duty by recognizing uncertified copies, copies certified to be true, photocopies, and extracts of an original document in absence of the original document as a valid "instrument" for the purposes of payment of stamp duty. This pragmatic shift enhances enforcement capabilities and reflects a modernized approach to fiscal governance.
Alignment of Leave and License Agreements
Section 3A of the Principal Act now aligns leave and license agreements with leases for stamp duty purposes. By bringing these agreements under the same fiscal framework, the Amendment Act eliminates inconsistencies and ensures uniform treatment, enhancing clarity for property-related transactions.
Procedural Efficiencies
The amendment to Section 17 of the Principal Act extends the timeline for stamping tribunal or court orders approving corporate restructuring transactions from the present 30 to 60 days, addressing concerns of stakeholders with regards to procedural and timeline-related challenges. This business-friendly reform eases compliance burdens and reflects a responsive attitude toward easing procedural pressures without compromising regulatory discipline.
Infrastructure Development Incentives
A new framework under Section 30 read with Article 5(gc) of Schedule I of the Principal Act has been introduced to explicitly include Build-Operate-Transfer and Public-Private Partnership projects as an "instrument" for the purposes of payment of stamp duty which is now determined at the rate of 0.10% of the contract value and with a minimum and maximum cap of Rs. 5,000/- and Rs. 25 Lakhs respectively. This much needed framework will now eliminate fiscal uncertainties in high value projects and supports the vision of Gujarat Administration in becoming a growing hub for infrastructure investments.
Streamlined Adjudication and Penalties
The amendment to Section 31 of the Principal Act streamlines adjudication of stamp duty on an instrument executed within the State of Gujarat by setting a 60-day deadline and 3 months for the instruments which are executed outside of the State of Gujarat, from the date of receipt in the State of Gujarat. The amendment also prescribes a uniform adjudication fee of Rs. 1,000.
The amendment to Section 33 of the Principal Act strengthens the enforcement powers of the Collector by allowing action to be initiated, where a stamp duty deficiency is suspected, based on mere copies of instruments wherein the original instruments has not been produced. This marks a pragmatic shift towards substance over form, enabling authorities to pursue recovery even when the original document is not produced.
Whereas, the Amendment Act has replaced the discretionary penalty regime for insufficiently stamped instruments under Section 39(1) of the Principal Act with a new structured framework. Under the new structured framework, voluntary disclosures by a stakeholder in incur a 2% monthly penalty, capped at four times the shortfall, while suo moto actions by the Collector or other authorities attract a 3% monthly penalty, capped at six times the deficiency. A minimum penalty of Rs. 300 applies in both cases. Periods of policy-based exemptions or adjudication delays are excluded from penalty calculations, promoting fairness and transparency.
Revised Stamp Duty on Articles of Association
The amendment to Article 12 of Schedule I of the Principal Act increases the maximum stamp duty on Articles of Association from Rs. 5 Lakhs to Rs. 15 Lakhs which significantly impacts large corporations, private equity-backed ventures, and startups with substantial share capital, prompting careful consideration of capital structuring and jurisdictional choices.
Valuation of shares and increased conveyance duty cap on orders of Tribunal approving corporate restructuring transactions.
The Amendment Act modifies Article 20 of Schedule I of the Principal Act revising the valuation method for determining stamp duty on the value of shares issued in mergers and demergers, as a consideration, involving unlisted or infrequently traded shares. Stamp duty in such cases shall now be based on market value of the transferee company and if the same is not ascertainable, the stamp duty will be based on a value determined by the Collector after giving an opportunity of being heard to the transferee company. This shift to determination of stamp duty basis the face value of a share to economic market value of a share, increases stamp duty liability, affecting transaction costs and structuring.
Further, the stamp duty cap on conveyance under Article 20(d) Schedule I of the Principal Act has been increased from Rs. 25 Crores to Rs. 50 Crores, addressing the outdated limit and aligning with the scale of modern corporate transactions like mergers and demergers providing greater fiscal certainty for the state, however, will pose substantial financial burden in big ticket corporate restructuring matters.
Reduced Duty on Lease Agreements
Amendment to Article 30 of Schedule I of the Principal Act reduces stamp duty on lease agreements, particularly for residential and commercial long-term leases. This reform incentivizes formal registration, enhancing legal certainty and reducing unregistered and informal arrangements.
Streamlined Treatment of Leave and License Agreements
The omission of Article 30A of Schedule I of the Principal Act, combined with the amendment to Section 3A, eliminates separate stamp duty rates for leave and license agreements, treating them akin to leases. This simplifies the fiscal framework and reduces rental costs for commercial and residential properties.
Conclusion
The Amendment Act represents a forward-thinking reform that aligns fiscal laws with contemporary business needs. By closing loopholes, enhancing procedural clarity, and rationalizing stamp duty frameworks, the Act strengthens compliance and administrative efficiency. These changes underscore Gujarat Administration's commitment to fostering a transparent, predictable, and business-friendly regulatory environment, positioning the state as a premier destination for corporate and infrastructure investments.
However, the amendments introduced by the Amendment Act also present significant challenges for stakeholders, particularly due to the increase in stamp duty rates across several key instruments. The steep hike in the cap on stamp duty, especially in cases involving instrument of conveyance under Article 20(d) of Schedule I of the Principal Act and inclusion of any agreement for takeover of the management or control of a company by transferring or purchasing the shares of a company effecting a change of control of a company now attracting ad valorem stamp duty at conveyance rates under the revised framework, will impose a substantial financial burden on companies. This heightened cost of compliance may disincentivize businesses from setting up operations or execute any major transactions in the State of Gujarat, prompting them to explore alternative jurisdictions with more favourable stamp duty frameworks.
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