After more than six months of announcement, the government is yet to notify the Commodity Transaction Tax (CTT) on trading at commodity exchanges. According to a senior tax official, no target for CTT has been set as the government yet to take a decision.
Commodity exchanges, regulator Forward Markets Commission and the department of consumer affairs have been consistently opposing the move and have drawn the attention of the finance ministry of the adverse impact that the CTT would have on the growth of the exchanges.
In February, the Union finance minister had proposed the introduction of a CTT on exchange-traded commodity futures and options in his Budget speech. The Budget had 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. This implies that a levy of Rs 17 as CTT for every Rs 1-lakh trading at exchanges. With the CTT, the transaction cost would go up to Rs 21, including service tax, from the current level of Rs 3.
The exchanges have been urging that as the commodity derivatives market is at a nascent stage (only 4 years old), the imposition of the CTT would cause a more-than 800% increase in cost of transaction which would be a ?death knell? for them. The government is expected to generate Rs 680 crore by levying CTT at the present turnover level of all commodity exchanges.