Mumbai: Introduction of commodity transaction tax (CTT) similar to that of securities transaction tax (STT) seems to have not gone well with the exchanges and broking firms alike.
Apart from the 12 per cent service tax, the Union budget has added an expenditure of 6 per cent as exchange levy and Rs 17 per lakh as CTT. These together are likely to increase the cost of trading in commodity futures by more than 800 per cent.
When STT was introduced in the securities market it was allowed to set off losses against profits from similar business. Moreover, the long and short term capital gains benefits extended to securities market has not been extended to commodities trading.
Jignesh Shah, MD & CEO, MCX, said: “Commodities markets are global asset class and trade flows to most efficient markets which has least trading cost. With the addition of commodities trading tax, Indian market will become unusable for risk management.”
P. H. Ravi Kumar, MD, NCDEX said: “Unlike securities markets, commodity markets perform the essential function of price discovery and the CTT will adversely affect the price discovery process. If and when CTT is to be introduced in commodity markets in future, it has to be done only with the related benefits already extended to the securities markets.”
Broking firms expect the volumes to come down as the cost of trading goes up. Sushil Sinha, Assistant General Manager, Karvy Commodities, said: “Introduction of CTT will shoo away investors and will also impact intra-day volumes. Liquidity may come under pressure”.
Dilip Bhatia, Director, Kotak Commodity Services, said: “CTT will affect the viability of trades for short term traders and arbitrageurs. In addition introduction of service tax on the services of commodity exchanges will further affect commodity businesses.”
Naveen Mathur, Head - Angel Commodities, said: “CTT would act as a dampner to commodities trading, being still in a nascent stage.”
On the positive, Jayant Manglik, Head - Commodity Business, Religare Commodities, said: “The Centre’s move shows increase in the government interest in expanding the commodity futures markets in line with equity markets and is a reiteration of the fact that investing in commodities is now an accepted investment avenue like in developed countries. It will also increase tax-compliance by default because the tax will be levied at the time of trading itself.”
Apart from the 12 per cent service tax, the Union budget has added an expenditure of 6 per cent as exchange levy and Rs 17 per lakh as CTT. These together are likely to increase the cost of trading in commodity futures by more than 800 per cent.
When STT was introduced in the securities market it was allowed to set off losses against profits from similar business. Moreover, the long and short term capital gains benefits extended to securities market has not been extended to commodities trading.
Jignesh Shah, MD & CEO, MCX, said: “Commodities markets are global asset class and trade flows to most efficient markets which has least trading cost. With the addition of commodities trading tax, Indian market will become unusable for risk management.”
P. H. Ravi Kumar, MD, NCDEX said: “Unlike securities markets, commodity markets perform the essential function of price discovery and the CTT will adversely affect the price discovery process. If and when CTT is to be introduced in commodity markets in future, it has to be done only with the related benefits already extended to the securities markets.”
Broking firms expect the volumes to come down as the cost of trading goes up. Sushil Sinha, Assistant General Manager, Karvy Commodities, said: “Introduction of CTT will shoo away investors and will also impact intra-day volumes. Liquidity may come under pressure”.
Dilip Bhatia, Director, Kotak Commodity Services, said: “CTT will affect the viability of trades for short term traders and arbitrageurs. In addition introduction of service tax on the services of commodity exchanges will further affect commodity businesses.”
Naveen Mathur, Head - Angel Commodities, said: “CTT would act as a dampner to commodities trading, being still in a nascent stage.”
On the positive, Jayant Manglik, Head - Commodity Business, Religare Commodities, said: “The Centre’s move shows increase in the government interest in expanding the commodity futures markets in line with equity markets and is a reiteration of the fact that investing in commodities is now an accepted investment avenue like in developed countries. It will also increase tax-compliance by default because the tax will be levied at the time of trading itself.”
