CTT on non-agri futures a discriminatory move, says industry
New Delhi: Led by country's biggest commodity bourse MCX, the industry on Thursday strongly opposed the imposition of CTT on non-agri futures trade cautioning that the "discriminatory" move will result in shifting of trade to global market, but rival NCDEX struck a different note by stating it will "strengthen agricultural futures".
Other exchanges and brokerage firms were of the view that commodity transaction tax (CTT) of Rs 10 on a transaction of Rs 1 lakh would discourage day-traders and speculators, resulting in a big drop in business of five national bourses.
"With respect to CTT, the discrimination is glaring between agri and non-agri commodities; which is not the case as regards security transaction tax (STT). This treatment is like having STT on shares of 'Company A' and no STT on 'Company B'," MCX Managing Director and CEO Shreekant Javalgekar said in a statement.
He further said that though currency markets are 500 percent bigger than the commodities markets, yet there is no transaction tax levied on them, which is again discriminatory.
Javalgekar also said that Finance Minister P Chidambaram has levied higher CTT of 0.01 percent on non-agri items. including gold compared with 0.001 percent on gold ETFs, which is fully backed by physical gold.
"The commodities futures industry fails to understand this rationale. ...CTT on Indian commodity exchanges will increase the transaction cost by more than 300 percent on an average, which will drive the Indian industry towards dabba trading or international markets," he said.
Turnover from futures trade in farm items contributed only 13 percent of the total Rs 144.17 lakh crore during first 10 months of this fiscal. The rest business came from bullion, metals and energy items.
However, NCDEX Managing Director and CEO R Ramaseshan said: "By imposing a low rate of 0.01 percent CTT only on transactions in non-agricultural commodities, the Finance Minister has taken a cautionary step in this matter."
He welcomed the decision to not consider trading in commodity derivatives as speculative transaction and allow CTT as deduction if income from such transaction is a part of the business income.
NMCE Managing Director Anil Mishra said higher transaction cost would impact exchanges' turnover. However, since CTT has been imposed on seller alone, its impact would be slightly less.
Brokerage firm SMC Comtrade Chairman and Manging Director D K Aggarwal said: "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."