The government is likely to reduce the proposed commodities transaction tax (CTT) that had triggered protests from commodity exchanges.
The government had proposed a commodities tax of Rs 17 per lakh on commodities traded. Government officials, who did not wish to be identified, said the government was likely to reduce it to Rs 12 per lakh. This would reduce the transaction cost.The reduced tax rate is likely to be announced when the Finance Bill 2008-09 comes up before Parliament shortly.
The commodities tax is modelled on the lines of the securities transaction tax (STT) imposed on equity trading in stock exchanges.
Currently, the cost of transaction on commodity exchange is Rs 2 per lakh. After the imposition of the CTT at Rs 17 per lakh and and the service tax of Re 0.25 per lakh according to a Budget proposal, it will go up to Rs 19.25 per lakh. The government has estimated a revenue collection of Rs 1,000 crore through the CTT.
Chiefs of all the three commodity exchanges, the National Commodity and Derivative Exchange, Multi Commodity Exchange and the National Multi-Commodity Exchange had earlier made a representation to the Forward Market Commission and the Secretary of Ministry of Consumer Affairs.
The proposed move could make Indian commodity markets more dormant and illiquid. Indian exchanges would lose their global competitiveness, a chief executive officer of one of the commodity exchange, said.
“The government has banned futures on some of the food items and there are indications that more such restrictive measures are in the offing, which in turn has resulted into drastic drop in volume. The hike in the transaction cost would significant affect the growth of the commodity market in the country,” he said.