Column: Beware, CTT is round the corner

There are at least three compelling reasons for introducing the commodity transaction tax (CTT) this year. The first is that the government requires money, and any amount is welcome as the effort is to look at all options. The second is that if the stock markets are subject to the securities transaction tax (STT), why not the commodity market? The third is that the market is now mature, or has reached whatever level of maturity that is possible given the constraints of absence of movement in policy, and is almost a decade old. In fact, as a corollary, once done, the government can also start looking at the forex derivative market.

The crux of the debate really is how many layers of taxation there should be in any market. There is already a service tax being imposed as well as a capital gains taxes. The rationalisation of the latter led to the creation of STT. The idea was that such a tax makes collection easy and normalises the payment across all participants. Also, it helps to reduce volatility in the market as speculative activity gets more affected and, to this extent, the unwanted ‘noise’ is eliminated. The securities market did not want to have this tax and, when the commodity market started picking up, made an appeal to have the same across this segment too.

The securities market clocks around R1,00,000-1,20,000 crore a day, while

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