Report No. 67

Chapter 32

Articles 13-14

32.1. Article 13.-

Article 13 levies duty on a Bill of Exchange (other than one payable on demand). The duty varies according to the period within which the Bill is payable (after date or sight). It also varies according to the value. It is not necessary to go into details of the scheme prescribed by the article for calculation of duties. But even a cursory reading of the article will show that, in the first place, there is a difference in the duty depending on whether the bill is payable within 3 months after date or sight, or whether it is payable within 6 months after date or sight, or whether it is payable within 9 months after date or sight, or whether it is payable within one year after date or sight, or whether it is payable at more than one year after date or sight. After the date of payability is so ascertained, the next step is to have a look at the amount of the bill. The amount of the duty varies according as the bill is for Rs. 500 or less, Rs. 1000 or less, and more than rupees one thousand. In the first two cases (Rs. 500 or less, or one thousand or less), the duty is fixed, while in the last mentioned cases, the duty is ad valorem.

Prima facie, this appears to be a complex scheme. A bill of exchange is a commercial document and negotiable. If, therefore, a simple provision could be devised which would reduce the calculations and labour necessitated by the present complexity, the attempt would be worthwhile. It was with this object in view that we put a specific question in our Questionnaire1, setting out the scheme which, we thought, could be considered. Since many of the replies received agree with, the scheme which, we thought, could be considered. Since many of the replies received agree with the scheme proposed by us, we think that it is proper that the suggestion put by us in our Questionnaire should be pursued and carried out.

1. Q. 81.

32.2. Position in England.-

It may be noted that in England, now, the duty on an inland bill of exchange or a promissory note has been simplified1 as follows2.-

"Bill of Exchange or Promissory Note of any kind whatsoever (except a bank note)-drawn or expressed to be payable, or actually paid or endorsed, or in any manner negotiated, in the United Kingdom."

s. d. (The duty is 2d)

. .2d

1. Finance Act, 1961, section 33(1) (English).

2. The duty (expressed in the previous currency), is 2d.

32.3. Recommendation to revise Article 13(b) and (c).-

We, therefore, recommend that in Article 13, in clauses (b) and (c) respectively, a duty of 2 rupees 50 paise and 5 rupees for every one thousand rupees should be substituted (for the present duty). A flat duty would be still better, but, will, perhaps, be unacceptable. (The duty has already been reduced by a Government notification to 1/2 of that given in the Act)1.

1. See reduction of duty notified under S.O. 199(E) dated 16th March, 1976.

32.3A. It would appear that by a very recent notification,1 the remission of stamp duty that was granted so far in regard to stamp duty on Bills of Exchange and promissory-notes has been modified. The remission under the previous notification reduced the duty from what is mentioned in Article 13(b)(c) to 1/5th thereof. In modification of this remission, the recent notification adopts the proportion of 1/2 of the rate given in the Act. Certain proposals were made in our Questionnaire in regard to these instruments in order to simplify the rate structure so as to avoid elaborate calculations. The rates now require revision in view of the notification which was issued after the Questionnaire. Hence the rates which should now be recommended for these instruments should be as in the table below. A fresh notification for "usance" notes issued by certain institutions (mentioned in the notification of March 1976) will be necessary. We may state that principle of suggested scheme has been favoured by many of the replies to our Questionnaire.2

1. Notification No. S.R.O. 199(E), dated 16th March, 1976.

2. Question 81.

32.3B. We would have been happy to have the comments of the Ministry of Finance on this particular point, but as they have not been recovered1, we have considered it proper to make our recommendations as best as we could. Those comments would have enabled as to work out the implications in greater detail. This avoids the elaborate calculations which were required in England under the law before the 1961 amendment, and which are still required in India under Articles 13(b) and 13(c). We see every reason for simplifying the scheme of calculating duty on bills of exchange.

The effect of the proposed change can be thus illustrated by a comparative table. (This is not a draft).

1. Our Questionnaire was sent to that Ministry.

Comparative Table

		Present Act 1	Proposed 2-3
Artilce 13(b)	(i) If payable within three months.
	(b) if the bill does not exceed Rs. 500	Rs. 0.62 1/2	Rs. 2.50
	upto Rs. 1,000	Rs. 1.25	Rs. 2.50
	for Rs. 2,000	Rs. 2.50	Rs. 5.00
	for Rs. 5,000	Rs. 6.25	Rs. 12.50
Artilce 13(c)	(ii) If payable between 3-6 months.
	if the bill does not exceed Rs. 500	Rs. 1.25	Rs. 2.50
	for Rs. 1,000	Rs. 2.50	Rs. 5.00
	for Rs. 2,000	Rs. 5.00	Rs. 5.00
	for Rs. 5,000	Rs. 12.50	Rs. 12.50
	(iii) If payable between 6-9 months.
	if the bill does not exceed Rs. 500	Rs. 1.87 1/2	Rs. 2.50
	for Rs. 1,000	Rs. 3.75	Rs. 2.50
	for Rs. 2,000	Rs. 7.50	Rs. 5.00
	for Rs. 5,000	Rs. 18.75	Rs. 12.50
	(iv) If payable between 9-12 months.
	if the bill does not exceed Rs. 500	Rs. 2.50	Rs. 2.50
	for Rs. 1,000	Rs. 5.00	Rs. 2.50
	for Rs. 2,000	Rs. 10.00	Rs. 5.00
	for Rs. 5,000	Rs. 25.00	Rs. 12.50
	If payable at more than one year.
	if the bill does not exceed Rs. 500	Rs. 5.00	Rs. 5.00
	for Rs. 1,000	Rs. 10.00	Rs. 5.00
	for Rs. 2,000	Rs. 20.00	Rs. 10.00
	for Rs. 5,000	Rs. 50.00	Rs. 25.00

1. In calculating the present duty, the notification of 1976 is to be borne in mind.

2. The proposed rate is Rs. 2.50 for every 1,000 rupees or part in (b), and Rs. 5 for every 1,000 rupees or part in (c).

3. A fresh notification for usance notes issued by certain institutions mentioned in the notification of March, 1976 will be required.

Appendix

Notification S.R.O. 199(E) 16th March, 1976.-In exercise of the powers conferred by clause (a) of sub-section (1) of section 9 of the Indian Stamp Act, 1899 (2 of 1899) and supersession of the notifications of the Government of India in the Ministry of Finance (Department of Revenue) No. 15, dated the 15th May, 1957, and No. 6, dated the 14th July, 1961, the Central Government thereby directs that with effect from the 1st June, 1976 the proper stamp duty chargeable on Bills of Exchange specified in items (b) and (c) in Article 13 of the First Schedule to the said Act and promissory notes specified in item (b) of Article 49 of the said Schedule shall be reduced to one-half of the rates specified against the said items (b) and (c) in the said Article 13 :

Provided that the rates of stamp duty mentioned above shall not apply to usance Bills of Exchange or promissory notes drawn or made for securing finance from the Reserve Bank of India, Industrial Finance Corporation of India, Industrial Development Bank of India, State Financial Corporation, Commercial banks and co-operative banks for (a) bona fide commercial or trade transactions, (b) seasonal agricultural operations or the marketing of crops, or (c) production or marketing activities of cottage and small scale industries and such instruments shall continue to bear the rates of stamp duty at one-fifth of the rates specified against the said items (b) and (c) in the said Article 13.

Explanation 1.-For the purposes of the proviso

(a) the expression "agricultural operations" includes animal husbandry and allied activities jointly undertaken with agricultural operations;

(b) "crops" include products of agricultural operations;

(c) the expression "marketing of crops" including the processing of crops prior to marketing by agricultural producers or any organisation of such producers.

Explanation 2.-The duty chargeable shall, wherever necessary, be rounded off to the next five price.

[No. 16F. No. 471/17/76-Cus. VII]
O.P. Mehra, dy. Secy.