Why does stamp duty vary between states despite the entire stock broking business beng regulated by SEBI, and the tax system being under central govt.?
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Stamp duty is administered by the State authorities and hence the amount varies according to each State’s law. I think this is because the Indian Constitution allows every state to function as an independent legislative body empowered to frame laws on all matters which includes deciding the rate of Stamp duty for all transactions.
This however does not allow a level playing field to market participants because the rate of Stamp duty for the same transaction may vary based on the location a client is trading from. There has been a move by the market regulators in this direction to bring about a common rate of Stamp duty for all Stock/Commodity market transactions and only time will tell if its implemented at all.
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Stamp Duty is just another ploy by the government to raise money from the public. So, it will be levied based on the economic condition of that state. Gujarat/ Delhi, which are development-oriented states would charge higher stamp duty [without a max. cap] with purpose of using the funds for development projects. Kerala may be doing this just to provide basic amenities to people.