Assocham for ’One Nation, One Stamp Duty’ for M&A transactions

Industry body Assocham has urged Finance Minister Nirmala Sitharaman to levy tax on mergers and acquisition transactions on the principle of 'One Nation, One Stamp Duty', as M&A activities are expected to rise in post-COVID-19 era.

The chamber has made a representation to the Finance Minister regarding 'One Nation, One Stamp Duty' to ease M&A transactions.

"Comprehensively listing the issues, including the high cost of taxation at the level of states as also the compliance of the Income Tax procedures, the Assocham has sought better coordination between different wings of the government and regulators," it said in a release.

It pointed out to a situation where an M&A transaction is subjected to stamp duty separately in two different states since the deal has an inter-state nature.

"Is it not unfair that the Transferee Company is required to pay Stamp Duty twice on the transfer of assets and liabilities...? Even the basic principles of law specify that one cannot be stamped or taxed twice for transfer of asset once," the representation said.

Assocham Secretary General Deepak Sood said that given the level of stress on the balance sheets, especially in the post-COVID-19 era, consolidation is expected across different sectors of the industries.

"Several of the promoters, reeling under the economic impact of the pandemic, may put businesses on the block; whereas those with deep pockets would sense valuation opportunities. Thus, a rise in the number of M&As is expected, and the process should be facilitated," he said.

Sood further said friendly M&As are the appropriate solutions, far better than the entities being pushed into the Insolvency and Bankruptcy Code (IBC).

"Even in the best of times, the change of ownership, inter-group amalgamations should be facilitated for better efficiency and enhancing shareholders' value," he said.

The representation to the Finance Minister also talks about the procedural issues faced concerning clearances from the market regulator, Sebi, stock exchanges and the tax authorities.

"As regards Income Tax, mandatory documents and clearances do not reach the NCLT benches within the timelines," Assocham said.

In any case, given the workload with the National Company Law Tribunal (NCLT), separate benches should be created for faster clearance of the M&As, it said.