Industry chamber CII today said the introduction of currency futures trading in the country will bridge the missing markets in India, but opposed any move to impose Securities Transaction Tax (STT).
The currency futures trade at four decimals and the value of any currency is very price sensitive and therefore, imposition of STT will distort market pricing and this could lead to Rupee behaving differently vis-a-vis the actual exchange rate of a dollar, the chamber said in a release.
This difference in the price would discourage hedgers to use the market, which is the very purpose for the creation of the market, it said.
Although currency futures trading would start from August 29 at the National Stock Exchange, there is no clarity on imposition of tax.
Citing RBI's working group recommendation, the chamber said recently the central bank announced the intent to start interest rate derivatives and requested the government not to impose STT on the transaction.
CII is of the opinion that STT should not be applicable on the exchange traded currency futures like it has earlier made case for non-implementation of CTT in the commodities market, it added.