Leading stock exchange NSE on Tuesday reported a 94 per cent year-on-year surge in consolidated profit after tax to Rs 3,834 crore for three months ended December 2024. It posted a Profit After Tax (PAT) of Rs 1,975 crore in the year-ago period.
In a memorandum to the Finance Minister, the exchanges said that FM's proposal to impose the Commodities Transaction Tax (CTT) will ruin the budding commodity futures business in India. In its arguments, it said CDM is at a nascent stage. It is only 4 years old. Participation of banks, mutual funds, FIs, FIIs is still not allowed. Options contracts, index futures & futures based on intangibles are still to come. Cost increase in India will induce hedgers to global exchanges.
The commodity transaction tax (CTT) proposal has started taking its toll on commodity exchanges. According to exchange officials, the turnover of commodity bourses has dropped sharply on transaction tax proposal and reports that the government may ban Futures trading of more commodities. The turnover may get eroded by another 20-30% once CTT comes into effect. CTT was unique and it has not been imposed on any Futures market anywhere in the world.
Hope floats for higher trading volumes; warehousing and cold chain facilities get tax incentives.
The uncertainty over the implementation of the new tax continues as the Finance Bill has not been passed by the Parliament. Finance minister P Chidambaram had announced in his Budget proposal that the levy would come into effect from April 1. The uncertainty over the implementation of the new tax continues as the Finance Bill has not been passed by the Parliament. P Chidambaram had announced in his Budget proposal that the levy would come into effect from April 1.
With the introduction of CTT, commodity players raise their doubts about the fledgling futures market.
The commodities transaction tax is likely to come into force within the next two months as the details, including the collection, payment and the procedures for filing returns, will take some more time to be firmed up. The CTT, which will be administered by the Central Board of Direct Taxes, will be levied at the rate of 0.017 per cent on sellers of commodity futures as well as options. Purchasers of options, who exercise them, will pay 0.125 per cent
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.
Even as experts were debating pros and cons of the waiver, came the first-ever announcement in the history of commodity markets anywhere in the world the introduction of Commodity Transaction Tax and this, coupled with service tax imposed on commodity exchanges, was a blow to the nascent commodity Futures industry in the country.
The government on Friday proposed hiking the securities transaction tax on Futures & Options (F&O) contracts, a move that will increase the trading costs in the derivatives segment as well as help in curbing excessive trades. In the Finance Bill 2023, passed by the Lok Sabha on Friday, the Securities Transaction Tax (STT) on options is proposed to be increased to 0.0625 per cent from 0.05 per cent and on futures contracts to 0.0125 from 0.01 per cent. Analysts opined that higher STT will shore up the government's revenues to some extent and also discourage excessive trading since a large number of retail traders are losing money in the segment.
The Committee, in an earlier report on the Direct Taxes Code (DTC) Bill, had favoured abolition of STT.
The government on Monday abolished the Commodity Transaction Tax (CTT) that was announced in the Budget last year, but was yet to be implemented and the commodity exchanges rejoiced the decision.
Brokers have only kept guarantees for which they have open positions.
Sources said much has been done to ease the tax burden of the middle classes in the last five years, and that such a measure affects only a limited segment of people when the focus should be to put money in rural areas. Archis Mohan reports.
'A total overall of the existing way of working by abolishing taxes and allowing citizens to help themselves without any government bottlenecks and impediments,' observes Rahul Mishra.
The removal of Commodities Transaction Tax (CTT) in the Budget 2009-10 may impact securities trade as investors may consider diverting focus to commodities market, SMC Capitals said in a report.
The Finance Minister Pranab Mukherjee on Monday tabled the Economic Survey for 2008-09 that prescribes doing away with cess, surcharges on taxes, including Fringe Benefit Tax, and sweeping refroms in areas like petrol pricing and financial sector.
Unveiling the Budget for 2009-10, Finance Minister Pranab Mukherjee said, "MAT was introduced to address inequity in taxation of corporate taxpayers. In the quest for greater equity, I propose to increase the rate of MAT to 15 per cent of book profit from the present rate of 10 per cent."
Finance Minister Pranab Mukherjee has announced that Fringe Benefit Tax (FBT) has been abolished. The commodity transaction tax (CTT) has also been abolished. The Goods and Services Tax (GST) will come into effect from April 01, 2010, Mukherjee said.
A higher transaction tax is likely to defeat the very purpose of commodity markets by forcing farmers and hedgers to exit due to greater cost, an ICRIER report said.
On Sunday, exchanges and brokers got support against CTT from the apex commodities market regulator--the Forward Markets Commission. The regulator said that it would take up the demand for CTT withdrawal with finance minister Chidambaram.
Commodity futures market's dream run came to a halt in 2013 as a Rs 5,600 crore scam in Jignesh Shah-led spot exchange NSEL and imposition of transaction tax on non-farm items hampered the growth of business, with turnover estimated to dip by 30 per cent to Rs 125 lakh crore.
In terms of value, this translates into more than Rs 300 crore (Rs 3 billion) of delivered quantity.
It will be the first to go, in what has become an overcrowded segment since India first allowed futures trading in commodities in 2003.
'Now is the time for India to course correct and for the government also to course correct,' says businessman Mangesh Khatri.
The GIFT City management is in talks with Hong Kong, London, and Singapore arbitration centres
A key demand is to reduce the dividend distribution tax on listed firms.
Instruments such as Reits, InvITs, unsponsored GDR, GIFT find few takers.
FMC approves commodity bourse's contract-launch calendar for two years.
Finance firms in these SEZs likely to get tax breaks.
In an hour-long chat on rediff.com on Thursday, A K Prabhakar, senior VP and Head - Equity Research (Retail), Anand Rathi Financial Services Ltd, answered some important questions on the market.
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