Stamp duty collection has taken a dip as the rate is being rolled back to the normal level by slowly withdrawing the post Covid incentive.
The duty is paid on registration of sale deeds after purchase of real estate and it is borne by the buyer. A fall in collection means reduction in realty transactions.
In a bid to help the real estate sector that was hit badly by the pandemic, the state government reduced stamp duty rate to 3% from 6% in September last year. It was applicable till December 31.
The plan was to slowly rollback the cut. From January 1 to March 31, the rate is 4%. Regular rate of 6% will be charged from April this year.
Stamp duty collections had improved soon after the cut. The property registration in September doubled to 6,500 deeds as against 3,000-odd in August last year. The stamp duty collection. however, improved only by Rs5 crore reaching Rs40 crore.
The number of deeds getting registered increased steadily with moderate improvement in amount collected as duty too.
There was a sharp increase in December last year when the 3% duty was applicable. More than 14,000 deeds were registered bringing in Rs172 crore as stamp duty. This was an increase of 43% and 66% in terms of deeds registered and duty paid, respectively.
There was a quick decline in January when the 4% stamp duty rate came into effect. The number of deeds getting registered came down to 10,000 with Rs57 crore of stamp duty collections. As against a growth of 66% in December, the January collections fell by 66%.
Figures for February are yet to be compiled.
There was a similar trend in the Nagpur rural. The collection had reached a high at Rs36 crore in December. This was more than double than the earlier month’s collection. In January the collection fell to Rs16 crore.
In the meantime, the state government increased the targets which were eased considering the pandemic.
From Rs430 crore it was taken to Rs700 crore for Nagpur urban in December. Sources say it is exceptional to hike the target in middle of the year. This was done considering the higher collections when rates were down so that government’s requirement for funds could be met too.
The collections that had exceeded the earlier target now lag by 33% of the new estimates. The revised target for 2020 is lower by Rs80 crore as compared to that for 2019.
In Nagpur rural, over 83% of the revised targets have been met.
Builders say this means that tax collection is better when the rates are low. A similar hike is expected in March, the last month for 4% rate following which it may fall.
Gaurav Agrawala from the Confederation of Real Estate Developers’ Associations of India (Credai), Nagpur branch said, “The low rates had spurred activity. Even the government stands to gain in the form of GST if construction activity gets a push.”