The commodity transaction tax (CTT), announced by Finance Minister P Chidambaram in Budget 2013-14, may be notified next month if the issues raised by several bodies get sorted by then. After notifying, some more time would be given to exchanges to implement the new tax, said sources.
CTT is similar to the securities transaction tax (STT), applicable to capital market intermediaries. Finance ministry officials are working on a mechanism for exchanges to implement the new tax. Officials said the rules regarding implementation of CTT had been framed. However, some contentious issues need to be sorted out at the minister's level, after which it would go to the law ministry for vetting.
The tax has been proposed to be levied on non-agri commodities traded on recognised commodity exchanges. At present, there are six such exchanges. In 2012-13, the total volume traded on futures exchanges was Rs 167.5 lakh crore, of which 88 per cent, or Rs 147.4 lakh crore, was in non-agri commodities (excluding processed agri commodities).
CTT was proposed at the rate of 0.01 per cent of the transaction value and payable by the seller. This means, based on last year's volumes, the CTT burden comes to Rs 1,474 crore. Once notified, it was feared the tax would hurt volumes and liquidity of non-agri commodities. However, what constitutes non-agri commodities remains a contentious issue, said sources. While a finance ministry official ruled out deferment or roll-back of the tax, he agreed there are some issues related to classification of agri and non-agri commodities. The Central Board of Direct Taxes has suggested a classification of some of the disputed items, which is yet to be cleared by Chidambaram. "CTT is very much on. Hopefully, it will be notified next month," said the official.
Sources explained that oil seeds are clearly agri commodities, but oil or oilmeal are processed items and, hence, can also be treated as non-agri. For the purpose of levying income tax, only farmers' agri income is exempted from income tax and income of traders and others from processed commodities is liable for payment of income tax. However, if the same processed commodity is traded on futures exchanges, can CTT belevied on it is the issue which needs to be sorted by the finance minister. Besides oils, other processed commodities include sugar and guar gum.
