CTT (Commodity Transaction Tax)

CTT (Commodity Transaction Tax)

March 14th, 2013

In Budget 2013-14, Finance Minister P Chidambaram proposed 0.01% tax on the trade of non-agricultural commodities futures, the new tax is called Commodity Transaction Tax (CTT). As per Budget speech, there is no distinction b/w derivative trading in the securities market and derivative trading in the commodities market, only the underlying asset is different.

What is CTT?
Commodities Transaction Tax (CTT)

• Proposed in Finance Bill, 2013 for enhancing financial resources.
• A tax which shall be levied on non-agricultural commodities futures contracts at the same rate as on equity futures that is at 0.01% of the price of the trade.
• CTT would tax trading of non-farm commodities like gold, silver and non-ferrous metals such as copper and energy products like crude oil and natural gas in India.
• Here both parties—buyer & seller of contract—will be taxed depending on the amount of contract size.
• Similar to the Securities Transaction Tax (STT) levied on the purchase and sale of equities in the stock market.
• So far, commodity transactions have been exempted from any levy.
• Agricultural commodities have been left out of CTT.

What are the Advantages of levying CTT?

• It will open up new resources for the augmentation of government finances.
• CTT would generate revenues of around Rs.45 billion to government.
• It is also aimed at bringing transparency in the commodity exchange market.

What could be the disadvantages of CTT?

• CTT has been opposed by the experts and the PMEAC had also suggested against levying such a tax.
• CTT will increase the transaction cost because traders already pay brokerage, deposit margin, brokerage, stamp duty and transaction charges.