Chambers seek abolition of CTT

NEW DELHI: The industry has demanded abolition of the commodity transaction tax (CTT) even before it is implemented. Industry bodies CII, Ficci and Assocham in their pre-budget recommendations have asked the finance ministry to withdraw the tax to be levied on sale of a commodity derivative. The chambers have warned that it would lead to a 800% increase in the cost of transaction and will make commodity markets uncompetitive vis-��-vis global exchanges.

The finance ministry in the 2008-09 budget had proposed a CTT to the extent of 0.017% on sale of all commodity derivative contracts . The ministry had also proposed imposing a 12.5% service tax on the transaction fee earned by the commodity exchanges. The levy would have implied a steep increase in cost of transaction at Indian commodity exchanges, from Rs 2 at present to Rs 19.25 after the enforcement of the tax. Of this, about 85% was to be paid towards CTT and the rest towards exchange fee, service tax and stamp duty.

���CTT is not imposed in any other country. Its imposition in India would make our commodity exchanges globally incompetent and result in diversion of trade volumes to grey markets and international exchanges,��� Ficci said in its pre-budget memorandum.

Industry body CII said that the commodities market in India is still at a nascent stage and the market needs to attain its full potential before it could be taxed.

Under the Agriculture Produce Marketing Committee (APMC) Act, no tax, cess or mandi fee is imposed on the farmers but on the buyers. But since CTT is imposed on sellers, the farmer, who sells future contracts to be insulated from price fluctuation, would be required to pay CTT, CII added.