Cash transaction tax to go, futures levy stays: FM
May, 02nd 2008
The government said on Wednesday the country has enough stock of foodgrains and is ready to bear higher subsidy for fertiliser, but ruled out going back on the controversial commodity transaction tax (CTT) on the futures market.
We will do nothing to hurt farmers. If that means higher imports of fertiliser, bearing higher subsidy... every one of that will be done, finance minister P Chidambaram said in the Rajya Sabha replying to the debate on the Finance Bill. He said CTT is the mirror image of Securities Transaction Tax (STT) that was imposed on the stock markets and met with similar resistance.
CTT would also be accepted, he said. The Rajya Sabha later returned the Finance Bill, completing the Budget process for 2008-09. The lower house had on Tuesday approved the budget after the finance minister announced a number of changes.
The Budget had proposed to levy 0.017% CTT on transactions in commodity futures trading, which runs into lakhs and crores of rupees. With the government completing the budgetary process, there is no scope of withdrawal of the tax that was vehemently opposed by commodity exchanges.
The tax saw competing commodity exchanges jointly meeting several ministers, including agriculture and consumer affairs minister Sharad Pawar, to pursue their demand. BJP leader Jaswant Singh also questioned the rationale behind the tax. The Prime Ministers Economic Advisory Council, too, had recommended a cut in CTT rate.
Mr Chidambaram also said with the government devising alternative ways to trail black money, the Banking Cash Transaction Tax (BCTT) will be withdrawn by the end of this year. He said BCTT was introduced for a specific purpose of detecting unaccounted money. The other methods to catch people with unaccounted money would be provided in the new Money Laundering Law, Mr Chidambaram said.
He disagreed with Mr Singh that the BCTT was causing inconvenience to people. How many people take out Rs 50,000 in cash in a single transaction in a day," he asked.
Mr Chidambaram offered to share the names of some big fish caught by tax authorities with the help of the cues provided by the BCTT. He clarified the tax was applicable only on cash withdrawals and not on payment by cheques. He said the government may take more fiscal and supply-side measures to tame inflation that is close to the fastest pace in three years.