The government may impose a stamp duty of Rs 300 per crore (0.003%) on transactions in commodities, stocks and other derivatives, with the finance ministry moving a proposal to Cabinet for taking the final call, sources said.
Despite strong opposition from the Ministry of Consumer Affairs (MCA), the finance ministry has placed the proposal before Cabinet, they said.
"The Finance Ministry has proposed a uniform stamp duty of 0.003% on all kinds of derivatives, including commodities, stocks and even electricity. But we have strongly opposed for commodities," sources said.
Barring one or two states like Maharashtra, no other state governments have imposed stamp duty on commodity derivatives, they said.
In Maharashtra, the stamp duty on commodities is only 0.001%. Recently, the state government hiked the duty to 0.005%, but later rolled back the hike after concern was expressed by commodity markets regulator FMC.
According to sources, the MCA is of the view that commodities should be kept out of the ambit of stamp duty as the sector is already heavily taxed, with multiple taxes (like Mandi tax and VAT) by state and central governments.
It will only burden the nascent market by increasing the cost of commodity trade transactions and also encourage illegal trading, they added.
The Finance Ministry has proposed an amendment to the century-old Indian Stamp Duty Act to align the stamp duty law with contemporary requirements of the market and also to ensure an increase in the revenue collection of states.
Stamp duty accounts for a significant share of the tax revenue of states.
According to commodity market experts, "Experiences of various states show that the primary objective of garnering higher revenues from imposition of high stamp duty may not be met."
For instance, after the Delhi government imposed stamp duty on commodities trading in July, 2010, growth in trade volumes experienced a downturn in comparison to previous years, they said.
The commodity futures market did business worth Rs 119.48 lakh crore in 2010-11. Currently, there are five national level and 18 regional commodity exchanges in the country.