In a strong opposition to a proposed uniform stamp duty on all derivative trades, a host of commodity exchanges and market associations have asked the government to withdraw the proposal.
The country's five leading commexes, including MCX and NCDEX, as also over two dozen commodity market associations, have written to the Finance Ministry against the proposed move to impose a uniform duty of 0.003% on all derivative trades, including in commodities, equity and electricity.
This would entail a levy of Rs 300 on every Rs 1-crore transaction in derivative trades.
Pointing out that most states currently have a very low or even zero stamp duty structure, the commodity market entities have said that the proposed move would increase the transaction costs and would cripple the economic interests of farmers and small enterprises.
The commodity exchanges having opposed the move before the Finance Ministry include Multi Commodity Exchange (MCX), National Commodity & Derivatives Exchange (NCDEX), National Multi-Commodity Exchange of India (NMCE), ACE Derivatives and Commodity Exchange (ACE) and Reliance Exchangenext (R-Next).
The other associations and organisations that have written to the Finance Ministry against the proposed move include Commodity Exchange Members Association, University of Agricultural Sciences, Bangalore, Delhi Bullion & Jewellers Welfare Association, the Solvent Extractors' Association, Soybean Processors Association, Bombay Bullion Association and Commodity Participants Association of India.
Besides, industry chambers like Assocham and Ficci have also opposed the proposed levy.
The country's largest commodity exchange MCX, in its plea to the Finance Minister Pranab Mukherjee, has sought exemption of commodity sector from the purview of the uniform stamp duty regime.
MCX has said that commodity derivatives were not asset classes like stocks, and therefore the two cannot be clubbed together for a uniform duty and the proposed would add to the already high level of taxation and increase the transaction costs for commodity trade.
Also, the proposed move could lead to rise of illegal 'dabba' trading in the commodity market, and the primary objective of higher revenue realisation might not be achieved by the government, MCX has submitted.
MCX's rival NCDEX has also said that the proposed duty would impose a high tax burden on transactions in the nascent commodity derivatives market, thereby increasing the cost of transaction manifold.
It has said that the commodity sector in India was already heavily taxed, with imposition of multiple taxes by the state and central governments.