Govt to amend Finance Act to levy CTT on options trading

The government today proposed to amend the Finance Act 2013 to levy commodities transaction tax (CTT) on options trading from April 1, 2018.
At present, option on commodity derivatives attracts STT (securities transaction tax), for purchaser at 0.125 per cent on settlement price, while for seller at 0.05 per cent.
The finance bill 2018 proposes to levy CTT on commodity options trading from April.
The government proposes to levy a CTT of 0.05 per cent on seller, while purchaser will have to pay lower at 0.0001 per cent where options is exercised.
"It is proposed to amend Finance Act, 2013 to rationalise levy of CTT on options in commodity futures," Finance Minister Arun Jaitley said in his budget speech.

By amending the Act, the government will expand the definition of 'taxable commodities transaction' to include 'options in commodity futures' under section 116 of the law.

The section 117 of the law will also be amended to levy CTT on seller as well on purchaser once they exercise options, as well as propose CTT rates.
Reacting to the proposal, leading commodity bourse MCX said there is clarity now with option on commodity derivatives being included in the definition of taxable commodity transaction.
The proposed rate of CTT will promote wider participation on the exchange in terms of popularising the newly launched Options, it added.

NCDEX Manging Director and CEO Vijay Kumar said: "The rationalisation of CTT for commodity options is also a welcome step and will help more participants use the exchange for price protection."
NCDEX welcomes the encouragement and support to farmers for use of options through farmers producer companies to make informed planting decisions and locking in prices prior to harvest, he added.