There was considerable uncertainty over the implementation of CTT. While all Budget proposals usually come into effect from April 1, broking firms decided not to levy the additional charge in the absence of a formal communication from the regulator, which felt that the levy will be charged only when the Finance Bill is cleared by Parliament.
| |
| Prime Minister Manmohan Singh is understood to have forwarded the proposal to his advisory council headed by C Rangarajan to review the tax, sources familiar with the developments said.
|
| |
| Brokers were quite unhappy with the tax as is is expected to impact liquidity and market-making, which are a must for a futures market. It is also expected to bring down volumes as the transaction cost goes up.
|
| |
| The US had tried to impose such a tax long back but dropped it after stiff resistance. Many international commodity experts have also made representations to the consumer affairs ministry, saying such a tax will only benefit competing countries such as Singapore or Shanghai as substantial volumes may shift there.
|
| |
| Traders pointed out that the tax will make the Indian market unusable for risk management. The Budget has added an incidence of 12 per cent service charge and Rs 17 per lakh for commodities trading, which will increase the cost by over 800 per cent.
|
| |
| The imposition of CTT, experts said will make Indian exchanges the most expensive ones in the world in terms of transaction cost.
|
| |
| On London Metal Exchange, for example, the cost of transaction of a base metals forward contract is 5 paise to Rs 1.12 per lakh, while on the local commodity exchanges (MCX, NCDEX, NMCE), if CTT is imposed, it will cost Rs 19.25 per lakh.
|
| |
They said the commodity market is a very different market unlike the equity market which is for investment. The introduction of CTT is, therefore, totally unjustified.
|
