May 10, 2013

Commodity Transaction Tax


Commodities Transaction Tax (CTT)
  • Proposed in Finance Bill, 2013 for enhancing financial resources.
  • A tax which shall be levied on non-agricultural commodities futures contracts at the same rate as on equity futures that is at 0.01% of the price of the trade.
  • CTT would tax trading of non-farm commodities like gold, silver and non-ferrous metals such as copper and energy products like crude oil and natural gas in India.
  • Here both parties—buyer & seller of contract—will be taxed depending on the amount of contract size.
  • Similar to the Securities Transaction Tax (STT) levied on the purchase and sale of equities in the stock market.
  • So far, commodity transactions have been exempted from any levy.
  • Agricultural commodities have been left out of CTT.
What are the Advantages of levying CTT?
  • It will open up new resources for the augmentation of government finances.
  • CTT would generate revenues of around Rs.45 billion to government.
  • It is also aimed at bringing transparency in the commodity exchange market.
What could be the disadvantages of CTT?
  • CTT has been opposed by the experts and the PMEAC had also suggested against levying such a tax.
  • CTT will increase the transaction cost because traders already pay brokerage, deposit margin, brokerage, stamp duty and transaction charges.