Unhappy with the government?s decision to introduce commodities transaction tax (CTT) on futures trading, top commodities exchanges such as Multi Commodity Exchange of India (MCX) and National Commodity & Derivatives Exchange Ltd (NCDEX) are formulating strategy to impress upon the government withdraw CTT.
All the stakeholders including MCX, NCDEX and officials from Forward Markets Commission (FMC) will be meeting the agriculture minister Sharad Pawar on Wednesday for chalking out a strategy.
According to Jignesh Shah, managing director of MCX, fundamentally, the stock exchanges and commodity markets are different. ?If an investor has to buy or sell stocks or shares, he has to trade on the Indian stock exchanges, but if a trader has to trade in gold futures, he can go to MCX and other international exchanges such as London Mental Exchange (LME) and Chicago Board of Trade,? Shah said.
?The cost of transaction at Indian commodity exchanges has to be at par with international markets, otherwise the volume of trade in the Indian commodity exchanges might shift to international exchanges or illegal or dabba trade,? Shah said.
?The step to impose CTT would result in distortion in pricing mechanism and in inefficiency in the commodity exchanges,? Joseph Massey, Deputy Managing Director of MCX said.
Massey of MCX said that the commodities trade is already subject to a series of taxes such as sales tax, VAT, mandi tax, octroi etc. ?The additional provision of tax would result distortion in the pricing which is not sustainable. The global prices would be become more competitive in comparison to Indian exchanges if CTT is imposed,? he said
The Union Budget has proposed a tax of 0.017% on the seller of a contract and 0.125% on the buyer. Besides, a service tax of 12% on the exchange levy and an education cess on the tax are also planned.