New Tax Malady Shows up in CTT Scan

Commodities transaction tax (CTT) has made a comeback four years after it was first introduced. The 0.01% CTT on non-agricultural commodities would push transaction costs up 5-10 fold on commodity futures.

CTT would lead to a payout of Rs 10 for a transaction worth Rs 1 lakh,up from about Re 1 to Rs 2.UPA-1 had announced a CTT at 0.017% (Rs 17 on a transaction worth Rs 1 lakh) in its last Budget. But it was never imposed following opposition by market participants.

Transactions would come down and liquidity would also fall, said Anjani Sinha,MD,National Spot Exchange. Since non-farm commodities account for more than 75% of the volumes on comexes, CTT would hurt a vast majority of market participants.

The government also proposed a cut in securities transaction tax (STT) on equity futures, besides drastic STT cuts on redemptions of ETFs and mutual funds. The proposals are expected to boost trading in gold ETFs.

Times of India, New Delhi, 01-03-2013