Tug-of-War: States asked to waive stamp duty on road projects

New Delhi: The road transport and highways ministry has asked states to waive stamp duty on road projects, arguing that such levies create compliance burdens and contractual ambiguity, undermining the stability and attractiveness of national highway projects.

States, including Uttar Pradesh, Madhya Pradesh, Karnataka and Odisha, are demanding that stamp duty be linked to contract value and project type, citing revenue losses, people familiar with the development said. While stamp duty rates across states range from 0.25% to 3%, Uttar Pradesh is demanding as much as 12% for toll-operate-transfer (TOT) projects, arguing that these are lease projects and should attract the levy.

"Some states don't want to let go of this easy and substantial chunk of revenue and hence raising demands from concessionaires, which could lead to several disputes and delay in projects," one of the persons said, requesting anonymity.


Under the current practice, the National Highways Authority of India (NHAI), which operates under the road ministry, enters into contracts with concessionaires for highway development across India using stamp paper worth just Rs 100.

"A state-level levy on contracts that channel revenues entirely to the central government becomes a circular fiscal transfer with no substantive value addition and only increases complexity within concession agreement," an official said.

The ministry said regulatory predictability was essential to maintaining investor confidence in the highway sector.

"Introducing state-wise stamp duty liabilities contradicts the principle of uniform national highway policy. It also creates room for disputes, renegotiations and delays in financial closure, all of which impede the execution and monetisation strategy of national highways," it said.

The government is of the view that treating toll projects as 'leases' across states could create significant financial and contractual challenges for the national highways sector.

An industry expert, who spoke on condition of anonymity, said imposing stamp duty at rates that vary across states on highway projects spanning multiple states will disrupt the financial modelling of long-gestation projects. "This will result in a great degree of uncertainty for long-term public-private-partnership (PPP) projects in the national highway sector," he said.