Finmin turns down proposal to tax commodity derivatives

"There is a lot of political opposition to the CTT (commodity transaction tax) since it would be imposed on trade and will also impact farm commodities. It's a tougher tax to impose in our political setting compared to the taxing transaction in the stock market through the STT (securities transaction tax)," a senior official told FE.

In the 2008-09 Budget, finance minister P Chidambaram had proposed a CTT of 0.017%. However, the proposal was put on hold after the then consumer affairs minister Sharad Pawar and Prime Minister's Economic Advisory Council chairman C Rangarajan raised objections.

Some stock market experts recently pitched for the imposition of the CTT, arguing that funds which would otherwise come to the market, are flowing into commodity derivatives due to the imposition of the STT on equity trading. The demand gathered pace after a panel headed by Parthasarthy Shome, which reviewed the General Anti-Avoidance Rules, recommended the removal of the short-term capital gains tax on sale of listed securities while simultaneously raising the STT to compensate for lost revenue. Currently on a delivery-based transaction of R1,00,000, stock investors pay R100 as the STT at 0.1% while 0.025% tax is levied on non-deliverable transactions.

However, industry chambers and commodity exchanges pitched for a differential treatment, saying stock market participants solely stress profits from soaring share value, while commodity market players operate with the

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