Commodity exchanges, regulators and analysts have expressed fears that the imposition of the Commodity Transaction Tax (CTT) would boost the parallel illegal market known as dabba trade. They opine that the CTT would make transactions at the commodity exchanges expensive and force traders to use illegal routes.
Dabba trading is done outside the purview of commodity exchanges by brokers who route their client’s sales or buy-orders. All the transactions are made in cash. The brokers match and execute orders, thereby saving official transaction costs. Dabba trading in equity and commodities have been banned in the country.
“It would make the transaction on the commodity exchanges expensive,” BC Khatua, chairman, Forward Markets Commission, told FE. “CTT may put enormous pressure on the viability of the commodity exchanges,” Ashok Mittal , CEO, Karvy Commodities, said. Finance minister P Chiambaram, during his Budget speech, had announced the imposition of a transaction tax of 0.017% on transactions at commodity exchanges. However, the government is yet to issue a notification on this.