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By Our Special Correspondent

Bangalore Feb. 1. In the wake of the fake stamp paper scandal, the Tax Reforms Commission headed by the former Chief Minister, M.Veerappa Moily, has recommended that stamp paper and stamps of all kinds, stamp vending and even franking should be replaced by account-based computerised transactions.

Briefing presspersons on the commission's recommendations on "stamp duty and non-judicial stamps", he said these issues had been covered in the reports submitted last year by the Tax Reforms Commission. He hoped that the recommendations made by the commission would be incorporated in the Budget.

Mr. Moily said the urgency was to restructure the entire registration system, reducing the dependence on stamps and stamp paper. The recommendations, he said, were aimed at "uprooting" the fake stamp paper racket that had been going on for quite some time in all the States.

The prevalence of fake stamp papers had resulted in negative growth rate of stamp duties and registration fees, he said and pointed out that the growth rate was -10.06 in 1998-99 and -9.11 in 1996-97. This meant substantial revenue loss for the Government.

In 1995-96, the Government collected Rs.437.93 crore from non-judicial stamp duty, which decreased to Rs.389.15 crore in 1998-99.

Besides the prevalence of fake stamp papers, the other reason for the decline was widespread evasion of stamp duty on conveyances.

Mr. Moily said that to administer stamp duty there had to be a mechanism for collecting duty as well as a mechanism for recording on the document that duty had been collected. Methods of collecting duty and recording payment on the document without using stamps and stamp paper, he said, had been considered from time to time. These included franking, embossing, certification, revolving credit accounts and passbooks.

Franking was a popular alternative, which provided for payment of the required duty in cash or cheque and authentication by an authorised officer on the document. Franking machines, he said, had been provided in the offices of sub-registrars and could be used by the taxpayers who did not want to opt for stamp paper or stamps.

There were other documents liable for stamp duty, extensively used for contracts executed in institutions such as banks, and financial and other lending institutions.

The commission, he said, had recommended that these institutions could be induced to collect stamp duty on behalf of the Government and remit it to the treasury while executing such documents. Inspection powers may be given to the Stamps and Registration Department to ensure that institutions collected and remitted duty as prescribed.

This, he said, would reduce the dependence on stamps and stamp paper and enable the Government to get online information on the duty realised. This was not possible today as stamps and stamp paper were bought before the taxable event (the execution of the document) took place and there was no correlation between the different kinds of transactions and the duty realised.

Mr. Moily said the commission had recommended abolition of adhesive stamps affixed on routine petitions, applications and complaints made to Government offices.

Meanwhile, there was a need to set up a regular monitoring mechanism, preferably in the Finance Department, to coordinate various aspects of stamp production, vending and duty realisation chain.

Online links between the Treasury, Finance and Revenue departments, the Accountant-General's Office and the office of the Inspector-General of Registration was necessary.

With regard to judicial stamp duties, he said the matter would be addressed in the second report of the commission.

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