Circular creates confusion over transaction tax

An Income Tax (I-T) department circular related to the Finance Act, 2008, has created confusion among stakeholders of the commodity derivatives market.

The circular talked about amendments to the law relating to the commodities transaction tax (CTT). While it mentioned that the tax would be levied once it was notified in the official gazette, a section of the market interpreted another clause in the circular to mean that the tax would be levied from April 1. The section creating confusion said that the law was amended to "provide that any amount of commodities transaction tax paid by the assessee during the year in respect of taxable commodities transactions entered into in the course of business shall be allowed as deduction, subject to condition that such income from taxable commodities transactions is included under the head 'profits and gains of business or profession'."

This part of the circular was to be applicable from April 1.

An I-T official said that so far the government has not notified the imposition of CTT, which was announced by former finance minister P Chidambaram in his budget speech in 2008.

Besides, the official said that the circular was an annual exercise, usually issued during January or February, but was delayed till March 27 this year due to the interim budget.

The official said that the department might issue a statement over the next few days to clarify the position as it had been inundated with calls from commodity exchanges and brokers.

When contacted, a senior executive of NCDEX also said that no tax was being deducted at present as CTT would be applicable only if an official notification was issued. The tax, akin to the securities transaction tax for equities, has been a bone of contention between the finance ministry and the market players. Due to pressure from the markets and the consumers affairs ministry, the North Block has not been able to levy CTT.

"It's a forgotten story for us," said an MCX executive.