In a major relief to participants in the commodities futures market, the government of Maharashtra has deferred the proposed raise in stamp duty therein, for the time being.
Confirming the development, B C Khatua, chairman of the commodity derivatives market regulator, the Forward Markets Commission (FMC), said, “The FMC was spearheading representations from commodity exchanges and had continuous dialogue with the state finance minister. It is good that they have deferred the decision.” Khatua said the government would consult FMC before deciding a new date.
In the state budget unveiled on March 23, the state government had proposed to levy a stamp duty of Rs 5 on every Rs 1 lakh transaction in commodity trade, significantly higher than the existing Rs 1 per Rs 1 lakh transaction. And, 0.005 per cent on all cash and derivatives transactions. It was to take effect from June 1, on all brokerages registered in Maharashtra.
A majority of broking firms had started shifting trades from Maharashtra to nearby states like Gujarat, where stamp duty is negligible. The Gujarat government has set up a mega business park to attract traders from Maharashtra. This shifting of many broking firm offices will now stop, said Dilip Bhatia, CEO of Ace Derivatives & Commodity Exchange.
“In the last two months, volumes in commodity futures has risen by around 50 per cent to nearly Rs 70,000 crore from Rs 40,000-45,000 crore earlier. With this decision, the uncertainty has ended,” said Naveen Mathur, associate director-commodities and currencies, Angel Broking.
“The government's decision to withdraw the proposed additional stamp duty is a very welcome step, which gives renewed confidence to financial market players who are striving to make Mumbai and Maharashtra a global financial hub. It will also help the state to attract new players from competing states and make commodity futures trade more than ever a part of India’s growth story,” said Lamon Rutten, managing director and chief executive officer of India’s largest commodity futures trading platform, the Multi Commodity Exchange (MCX).
Commodity exchanges have been charging Rs 200 for Rs 1 crore of transaction. Had the government increased the duty, the charges would have gone up to at least Rs 700 per Rs 1 crore of transaction, making it the costliest state in the country for commodity trade. The stamp duty would have affected official trading, hitting traders and hedgers. This would have also promoted “dabba trading” across all commodities, something FMC has been struggling to end.