Inflation fears may delay CTT

The implementation of the commodities transaction tax is likely to be delayed to the end of the year or even next year, thanks to the spiralling inflation and its political fallout.

The tax, the only new one imposed in this year's Budget, is yet to be notified, despite the Finance Bill being approved by Parliament on April 29.

A North Block source said the finance ministry would review the situation in August before deciding whether or not to notify the tax. Even if it decided to go ahead with it, the actual implementation might not happen till the end of the current year.

"The decision to implement will have to be taken at the political level as the overall economic situation is not favourable. This assumes more significance as foodgrain and commodity prices are on the rise," he added.

In order to keep food prices under check, the Centre has gone full stream ahead to procure foodgrain from farmers to fill its silos. If the CTT is implemented now, it could lead to hoarding in the short run and throw a spanner in the government's game plan, the official said.

By September or October this year, the government will have a better assessment of the current year's kharif harvest. A decision will be taken only after that, he added.

The delay will come as some relief to commodity traders, who were bitterly opposed to the tax and blamed it for a fall in their trading margins as well as for hoarding of commodities.

The tax is to be levied at the rate of 0.017 per cent on the sellers of commodity futures as well as options. The rate is 0.125 per cent for buyers of options, who have exercised the option.

With the delay, the exchequer stands to lose a significant part of the Rs 5,000-crore (Rs 50 billion) collection estimated from this new direct tax in 2008-09. With no clarity on its implementation, the Central Board of Direct Taxes has made no official projection for the expected collections from this proposed impost.