Union Budget 2013: 0.01% transaction tax on non-agri futures trade


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Union Budget 2013: 0.01% transaction tax on non-agri futures trade

Last Updated: Thursday, February 28, 2013, 14:01
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New Delhi: In a major set-back to commodity exchanges, Finance Minister Chidambarm Thursday proposed a transaction tax of 0.01 percent on non-agri futures traded on the bourses.

The commodity transaction tax (CTT), which is in similar lines of Securities Transaction tax (STT), would work out to Rs 10 for transaction worth Rs one lakh.

"There is no distinction between derivative trading in the securities markets and derivative trading in commodities markets. Only the underlying asset is different. It is the time to introduce commodity transaction tax in a limited way," Chidambaram said while presenting Budget for the 2013-14 fiscal in the Lok Sabha.

"Hence, I propose to levy CTT on non-agricultural commodities futures contracts at the same rate as in equity futures, that is at 0.01 percent from the price of the trade," he said.

However, Chidambaram said trading in commodity derivatives would not be considered as speculative transaction and hence CTT would be allowed as deduction if the income from such transaction forms part of the business income.

Reacting to the development, the country's largest commodity bourse MCX Managing Director and Chief Executive Officer Shreekant Javalgekar said, "CTT on selected items is not good. It will increase the hedging cost by 310 percent. It will reduce our global competitiveness."

He said the government has "targeted small segments and not currency futures." Much of non-agricultural items such as gold and silver are traded on the MCX.

It may be recalled that Chidambaram had announced CTT of 0.017 percent while presenting the 2008-09 Budget. However, the proposal was not operationalised due to apprehensions aired
by then Consumer Affairs Minister Sharad Pawar and PMEAC.

Amid speculation that the Finance Minister would impose CTT in the 2013-14 Budget to curb gold demand in view of high current account deficit, commodity exchanges and brokerage firms had made several representations opposing such a tax saying it will adversely impact the nascent market.

"With the imposition of CTT, the turnover will come down. It will negatively impact the market, especially MCX where maximum of non-agricultural commodities are traded," brokerage firm SMC Comtrade Chairman and Manging Director D K Aggarwal told PTI.

However, he said that the Finance Minister has provided some respite to traders by treating CTT not as speculative trade but as business profit/loss.

The turnover from futures trade in farm items contributed only 13 percent of the total Rs 144.17 lakh crore during first 10 months of the current fiscal. The remaining 87 percent business came from bullion, metals and energy items.


First Published: Thursday, February 28, 2013, 14:01


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