New transaction tax on commodity futures from 1 July

The Central Board of Direct Taxes (CBDT) notified today that the commodities transaction tax (CTT) will be levied from 1 July on all commodity derivative contracts other than those relating to 23 specified agricultural commodities.

The tax would be levied on futures trading and not on spot trading in the commodities.

The 23 agricultural commodities on which CTT will not apply on their futures contracts include almonds, barley, cardamom, castor seed, chana (chickpeas), copra, coriander, cottonseed and cotton.

The other agricultural commodities that will not come under CTT net are guar seed, isabgol seed, jeera, kapas (cotton), maize feed, pepper, potato, mustard seed, raw jute, red chilli, soyabean, soyameal, turmeric and wheat.

Processed agricultural items including sugar, soya oil and guar gum will attract CTT on futures contracts.

Finance minister P Chidambaram, in announcing his budget for 2013-14, had said that CTT will be applicable on non-agricultural commodities at the rate of 0.01 per cent.

There are 22 commodity bourses in the country, six of them operating at national level. All of them deal only in commodities futures contracts. More than 80 per cent of their turnover comes from non-agricultural commodities.

The combined turnover of these bourses stood at Rs170,46,840 crore in 2012-13, down by six per cent from the previous fiscal.

The CTT will have to be borne by the seller of the derivative contract.

Items that will attract CCT include gold, silver, crude oil and base metals, and processed farm items like sugar, soya oil and guar gum.

A report said the implementation of CTT has been delayed as there had been consultations between the stakeholders and the finance ministry over the list of non-agro commodities to be brought in the ambit of CTT.

The exchanges and brokers are of the view that CTT would discourage day-traders and speculators, resulting in a big drop in business of five national bourses.