 "Commodity Transaction Tax from 1 July: All you need to know about it")
The Finance Ministry today notified the implementation ofCommodity Transaction Tax(CTT) which will be levied primarily on processed agricultural commodities, including sugar, soya oil and mentha oil. The lax will be levied from 1 July.
Finance Minister P Chidamabaram had proposed this new levy in the Finance Bill, 2013 for augmenting financial resources.
What is CTT?
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Commodity Transaction Tax (CTT) is applicable for those dealing in trading of commodities. It is introduced to tax the commodity trading in India where both the buyer and the seller of a contract will be taxed depending on the amount of contract size.
CCT will be similar to thesecurities transaction tax (STT)levied on the purchase and sale of equities in the stock market.
Under the new arrangement, sellers will have to pay 0.01 percent tax, that is, Rs 10 for a transaction value of Rs 1 lakh. The current transaction cost (without any tax) is less than a third of this.
On what commodities will it be implemented?
About 11 processed farm commodities would attract CTT, which will be levied at the rate of 0.01 per cent of the transaction value. These would include sugar, guar gum, mentha oil, soya oil and rapeseed oil.
CTT will also be levied on gold, silver and other non-agricultural commodities traded through commodities exchanges.
As many as 30 pure agro commodities, including wheat, barley and chana, are likely to be kept out of the ambit of CTT.
Why are traders opposing?
The CTT will be additional burden on traders because they already pay deposit margin, brokerage, stamp duty and transaction charges.
MCX Managing Director and CEO Shreekant Javalgekar hadsaid Indian commodity exchanges will become 350 percent more expensive due to the CTT and that a bulk of the trade will shift to unofficial channels or move outside India.
Several apex industry chambers in their representations to Chidambaram have asked the government not to impose transaction tax on commodities derivatives as it would impact lakhs of jobs.
Industry experts say any transaction tax on commodity derivatives will shift the declining business to either illegal ‘dabba’ trading or overseas commodity exchanges.
‘Dabba’ trading is a commonly used term for off-market, informal trade activities, which are illegal in nature and where punters indulge in speculative trading to make quick money without paying any taxes or transaction fee.
How much revenue is it expected to bring?
According to the finance ministry estimate, CTT will bring revenues of aroundRs 45 billion to government. It is also aimed at bringing transparency in the commodity exchange market.
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