In the 2013 budget, CTT i.e. Commodities Transaction Tax was imposed on commodity futures trading. Every year the industry demands its removal, but so far only disappointment has come. Industry believes that not only has there been a huge drop in volumes due to the imposition of transaction tax, but also big corporates have started turning to the world markets. The argument of the industry is that if the government wants to save the commodity derivatives market, then this budget should announce the removal or reduction of CTT.
What is CTT?
In the 2013 budget, the Finance Minister had announced the imposition of 0.01 percent Commodities Transaction Tax on futures trading of non-agri commodities i.e. bullion, energy, metal. That means Rs 1000 tax on a transaction of Rs 1 crore. The purpose of the government behind imposing CTT was to raise at least Rs 2000 crore through it. But the industry believes that the government is able to recover only close to Rs 600 crore from this. In that too, if the loss of GST is included, then this amount sits only around 450 crores.
Drop in volume
Commodity Participants Association of India (CPAI), the largest organization of commodity brokers, believes that there has been a huge decline in commodity futures trading after CTT. In the last 9-10 years, volumes have dropped by more than 60 per cent. Where there used to be a volume of 70 thousand crores in 2012-13, it has come down to less than 31500 crores in 2020-21. Despite being ranked among the selected industrialized countries of the world, the trading of large industrial commodity copper on the Indian exchange MCX is 32 times less than the Chinese exchange and 63 times less than the London exchange.
The demand of the industry is that the government should immediately remove the CTT, as it is not getting any more revenue. If the Finance Minister cannot abolish the entire CTT, then at least reduce it from Rs 1000 per crore to Rs 500 per crore. And if this is also not possible, then CTT should be treated as tax paid and not as an expense. This will give tax exemption under Chapter VIII of the Income Tax Act. Industry organization CPAI believes that these steps of the government will not only increase the volume in the commodity market, but will also create new employment opportunities. Commodity market will strengthen, new products will come and the government will also benefit from revenue.