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 But then the tax proposal was withdrawn after an outcry from market participants.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

REUTERS SHOWCASE

Global Trade Deal

Global Trade Deal

Rural votes, old traumas drive India's WTO brinkmanship.`  Full Article 

E-Commerce Funding

E-Commerce Funding

E-tailer Flipkart raises $1 billion in funding.  Full Article 

Chopper Deal

Chopper Deal

Finmeccanica settles with Italy prosecutors to end Indian chopper deal probe.  Full Article 

Adani Project

Adani Project

Australia approves Adani's $16 bln Carmichael coal project  Full Article 

New Frontiers

New Frontiers

EXCLUSIVE - Goldman moves executive to new role building ETFs.  Full Article 

India-U.S. Talks

India-U.S. Talks

Kerry to woo Modi's India, but quick progress unlikely  Full Article 

Argentina Debt Default

Argentina Debt Default

Insight - Jaded Argentines brace for looming debt default   Full Article 

Anti-trust Probe

Anti-trust Probe

Microsoft targeted in apparent Chinese anti-trust probe  Full Article 

Gaza Conflict

Gaza Conflict

Israel strikes house of Hamas Gaza leader, digs in for long fight.  Full Article 

Reuters India Mobile

Reuters India Mobile

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