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Commex intra-day turnover slips as commodity transaction tax comes into force
July, 02nd 2013

Intra-day turnover of non-farm commodities and that of farm commodities for the day fell sharply on commodity exchanges MCX and NCDEX on Monday when commodity transaction tax (CTT) came into force.

Till 5 pm on Monday evening, non-farm commodities on MCX had totted a turnover of around Rs 20,000 crore against an average Rs 35,000 crore, or 40% lower, according to Naveen Mathur, associate director (commodity & currency), Angel Broking. By around 8 pm, he said, turnover, which normally ranges at Rs 45,000 crore, had almost halved to Rs 23,000 crore. Daily turnover on MCX normally stands at around Rs 60,000 crore. It remains to be seen how much the exchange tots up for the whole day to gauge the impact of the new levy.

"This is a direct impact of CTT," Mathur said. "Even on agri commodities, which posted around 3,000-3,800 crore by 5.00 pm on NCDEX over the past fortnight, turnover has slipped to Rs 2,200 crore," he added.

Brokers also said the bid-ask spread on gold futures had shot up to 7-8 per 10 gm from the normal 2-3 as arbitrageurs who trade between MCX and the US' commex were possibly absent from trade. Brokers requested anonymity as the government does not allow leveraged trades on overseas exchanges.

CTT at 10 per lakh is levied on sellers of non-farm commodities like gold and silver and processed products like soya oil and sugar. This is in line with securities transaction tax levied on the equity futures. The tax was introduced by finance minister P Chidambaram in the Union Budget FY14 amid a flurry of protests by commodity exchanges such as MCX.

Trade for agricultural commodities on commexes runs from 10 am to 5 pm daily while the trade timings for non-farm commodities are from 10.00 am to 11.30 pm. Prior to CTT, bourses levied a transaction tax of around 1.5 a lakh, which has now shot up by six times.

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