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The exemption list in the Commodities transaction tax (CTT) may be reworked before the final budget is presented in May 2014.
The restructuring of the exemption follows recommendations from the industry to expand the exemption list by including processed items of all agricultural commodities and not some like at present.
To this effect, the consumer affairs department under ministry of finance has also sought a clarification from revenue regarding the structure of the exemption list of CTT.
The exemption list under CTT currently has 23 agricultural items. However some processed items which are traded in futures markets are also included.
According to officials, while there is no problem to grant these commodities processed items such exemption, but it should be uniform across commodities. Therefore a clarification on the policy for taxation/ non taxation of these commodities has been sought, said officials.
According to industry sources there are certain discrepancies in the exemption list. For example, the exemption list includes both cotton and processed items like cotton seed oilcake/ kapasia khali. They added that similarly, soya bean oil and soybean meal should also be included in the exemption list.
However according to officials, the list is to be reworked to include only agricultural commodities or include all commodities along with processed items for all. It cannot be both ways. However the review will start as a budget exercise before May 2014 and this review will also clarify such matters, said sources.
Meanwhile, the Forward Market Commission scrapped the initial margin to be paid by trader to trade commodity futures if they give delivery on bourses. This relaxation was granted by FMC at a time when volumes on commodity exchanges fell after imposition of the commodity transaction tax.
As per the notification, such participants will not have to pay customary margins if they earmark goods for delivery on local bourses such as MCX, NCDEX, and NMCE from the next month.
Normally, exchanges charge participants an initial margin to trade a commodity futures contract. This apart, an additional margin is applied to take care of volatility, an ad hoc special margin on either the buyer or the seller when price swings become extreme and a delivery margin is applicable when the tender period of a contract begins. These will no longer apply on hedgers or sellers who give delivery on.
The finance ministry announced a CTT of 10 per lakh to be imposed on the sell side of non-farm futures such as gold, silver, crude oil, etc, during the presentation of the Union Budget for fiscal year 2014. The levy came into force from July 1, 2013.
According to commixes, the levy was unfair as commodities are subjected to a levy of taxes at the central and state level - like VAT, sales tax and mandi tax. However, the government did not budge.
