Budget 2013: Proposed CTT to hit MCX volumes

MUMBAI Thu Feb 28, 2013 3:54pm IST

A shopkeeper displays gold jewellery inside his showroom in Jammu September 15, 2008. REUTERS/Amit Gupta/Files

A shopkeeper displays gold jewellery inside his showroom in Jammu September 15, 2008.

Credit: Reuters/Amit Gupta/Files

Related Topics

Stocks

   

MUMBAI (Reuters) - The government on Thursday proposed imposing a transaction tax on futures contracts of non-agricultural commodities like gold, silver and base metals -- a move that could pull down the turnover of commodity exchanges, and mainly that of market leader Multi Commodity Exchange (MCX).

In his budget for the next financial year that begins April 1, Finance Minister Palaniappan Chidambaram proposed to levy a commodities transaction tax (CTT) of 0.01 percent of the price of every trade.

(Chidambaram calls for tough choices, click here)

(Rich taxpayers to pay 10 percent surcharge, click here)

(Budget 2013 highlights, click here)

Futures trade in non-agricultural commodities accounted for nearly 88 percent of the total turnover on Indian commodity exchanges in 2011/12, with MCX cornering much of the share.

Other bourses like the National Commodity and Derivatives Exchange, National Multi Commodity Exchange and Ace Derivatives and Commodity Exchange are likely to see minimal impact of the propsed tax as they derive most of their volume from agri commodities.

"Many in non-agriculture commodities have been bogged down by weak international prices and some have even shifted to equities on the hope that returns will be higher there," said Gnanasekar Thiagarajan, director of Commtrendz Research.

"This will only deter them further from dabbling in non-agriculture commodity futures."

The government had proposed the CTT in the 2008/09 budget, in a bid to bring the commodities market on par with the stock market where trades attract a securities transaction tax. But then the tax proposal was withdrawn after an outcry from market participants.

"It will be a detrimental step for the growing popularity of commodity futures as a hedging instrument," said D.K. Aggarwal, chairman of SMC Investments & Advisors Ltd.

(Reporting by Rajendra Jadhav & Siddesh Mayenkar; Editing by Sunil Nair)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Public Health

REUTERS SHOWCASE

Airtel Profit Jumps

Airtel Profit Jumps

Bharti Q2 net profit more than doubles   Full Article 

Maruti Earnings

Maruti Earnings

Maruti Suzuki net profit up 29 percent, beats estimates.  Full Article 

ICICI Results

ICICI Results

ICICI Bank Q2 profit up 15 percent, beats estimates.  Full Article 

Cost Cutting

Cost Cutting

PM Narendra Modi boots officials out of the first class cabin  Full Article 

Market at Record

Market at Record

Sensex, Nifty hit record highs; reforms outpace hawkish Fed.  Full Article 

Moody's on India

Moody's on India

Moody's welcomes India's policy steps, but wants to see more.  Full Article 

End Of QE

End Of QE

U.S. Fed ends bond buying, exhibits confidence in U.S. recovery.  Full Article 

Samsung Results

Samsung Results

Smartphone woes drag Samsung Elec Q3 profit to more than 3-year low.  Full Article 

Refining Margins

Refining Margins

BPCL aims to double refining margins with refinery expansion.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage