Commodity markets upset over CTT levy

In a major set back to commodity exchanges, Finance Minister Chidambarm on Thursday proposed a transaction tax of 0.01 per cent on non-agri futures traded on the bourses saying, "There is no distinction between derivative trading in the securities markets and derivative trading in commodities markets."

The commodity transaction tax (CTT), which is on similar lines of Securities Transaction tax (STT), would work out to Rs 10 for transaction worth Rs one lakh.

The redeeming feature of this levy is that Chidambaram has considered the trading in commodity derivatives as not speculative transaction and hence CTT would be allowed as deduction if the income from such transaction forms part of the business income.

"Hence, I propose to levy CTT on non-agricultural commodities futures contracts at the same rate as in equity futures, that is at 0.01 per cent from the price of the trade," he added.

However, the commodity market feels that the government's proposal to levy CTT on selected items is not good as it will increase the hedging cost significantly. In this context, the country's largest commodity bourse MCX Managing Director & CEO Shreekant Javalgekar said, "CTT on selected items is not good. For one, it will increase the hedging cost by 310 per cent and will also reduce our global competitiveness."

SMC Comtrade Chairman and Manging Director D K Aggarwal pointed out that "With the imposition of CTT, the turnover will come down. It will negatively impact the market, especially MCX where maximum of non-agricultural commodities are traded."