| Senior officials in the Central Board of Direct Taxes (CBDT) feel a tax should be levied on all transactions on the countrys 23 commodity exchanges. |
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| They say the Commodity Transaction Tax will be a natural corollary to the Securities Transaction Tax (STT), which is levied on all transactions on domestic stock exchanges. |
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| STT is levied on the value of taxable securities transactions since October 1, 2004. The rate varies from 0.025 per cent to 0.25 per cent per transaction. |
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| With equity markets booming, STT collections shot up from Rs 589 crore in 2004-05 to Rs 2,559 crore in 2005-06. The collections were Rs 4,648 crore in 2006-07. Till November 15, the collections totalled Rs 4,924 crore, up 69 per cent from the Rs 2,908 crore in the same period last fiscal. |
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| CBDT officials are hoping that a proposal for levying CTT finds its way into the next years Budget. They add that implementation of the levy will generate significant additional revenue for the government. |
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| The combined turnover of the 23 commodity exchanges during April-September stood at a whopping Rs 17,55,165 crore or around $439 billion. Assuming a similar tax rate as the STT, the revenue mop-up could be between Rs 438 crore and Rs 4,387 crore. |
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| A draft paper on levying CTT was submitted to the government five years ago. Now is the right time to look at it, said a CBDT official. Currently, about 4 per cent of all transactions on the commodity exchanges are delivery-based. Other deal are speculative, the official said. |
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| The industry, however, is not overly enthused. The government has already banned some agricultural commodities from trading on the exchanges. A tax on commodity transactions will affect volumes and send a wrong signal to traders and investors, said a commodity market expert. |
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| Ultimately, the burden of the tax will be on investors in agriculture commodities. The tax will also put pressure on the agriculture sector and prices, said Nirmal K Aggarwal, member, Multi Commodity Exchange of India (MCX). |
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| Indias top commodity exchange with 70 per cent market share in the total commodity derivatives trading volume. |
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| The government should hold open consultations with all stakeholders before such a tax is levied, Aggarwal said, adding that growth in commodity market trading had slowed over the past few years. |
