Stung again by fake stamp papers, Karnataka mulls big reform

Bengaluru: Karnataka has launched a major crackdown after detecting large-scale evasion of stamp duty running into thousands of crores due to counterfeit documents, including photocopied stamp papers and fake challans, akin to the Telgi scam that rocked the state two decades ago.

With loss to the exchequer being estimated in the range of Rs 3,000 crore to Rs 8,000 crore a year, the government is mulling a big policy decision to mandate digital payments for stamp duty by ending cash-based challans.

Sub-registrars may also lose the power to certify stamp duty payments. This “anachronistic power” sub-registrars have under Section 10A of the Karnataka Stamp Act is being misused, officials say.

Also, in the last month or so, authorities have issued over 2,600 notices to stamp duty evaders, including pawnbrokers and small financial institutions. These involve transactions using instruments such as power of attorney and mortgage deeds that require non-judicial stamp papers.

“Intermediaries are creating fake stamp papers by forging the signatures of sub-registrars. The volume of such forged stamp papers is difficult to even assess,” Revenue Minister Krishna Byre Gowda told DH.

“We’ve been receiving complaints about the misuse of manual stamps by duplication or forgery. So, we are actively looking into cases. Prima facie, there appears to be misuse and forgery. We’ll investigate thoroughly,” Gowda said.

The scale of the ‘scam’ was confirmed after the government looked into stamp duty payments on agreements between licensed electrical contractors and consumers of Escoms. There are 70,000 Escoms-licensed contractors.

“For a new electricity connection or any such work, you’re typically asked to bring a stamp paper. Escom-notified contractors enter into an agreement with you on a stamp paper. Once that’s done, Escoms authorise the work,” a senior revenue official said.

Many such agreements are fraudulent. DH has copies of agreements showing sub-registrars having certified multiple stamp duty payments on a single challan. Apparently, this has been happening for several years now.

Official sources say duplication of challans is rampant. With thousands of challans, there’s no track of them due to a lack of reconciliation.

“One challan is being used to attest multiple stamp duty payments,” Principal Secretary for Revenue (Stamps & Registration) Rashmi V Mahesh confirmed. "A stamp paper is photocopied multiple times. It gains value over a period of time. It is sold to citizens at a premium while the government hasn't received a single rupee," she said. 

After the Rs 33,000-crore Telgi scam, Karnataka introduced e-stamping: electronically generated impression on paper to denote stamp duty payments. But the provision of challan-based payments coupled with the powers of sub-registrars under Section 10A has meant duplication of e-stamps as well. 

"Issuing a large number of stamps that require a lot of manual reconciliation to ensure they're legal is unnecessary in the era of digital transactions. It is an anachronism," Gowda said. 

Apart from wanting to do away with Section 10A entirely, Gowda's department is planning a digital platform for stamp duty payment on non-registrable instruments by April 2025.