The commodities transaction tax (CTT) could divert volumes from domestic commodity exchanges to foreign platforms and may lead to a flourish in dabba trading, according to Forward Markets Commission (FMC) Chairman B C Khatua.
Khatua was speaking on the sidelines of the World Commodity Forum in Mumbai on Friday.
In his Budget speech, the finance minister had proposed the CTT, in line with the securities transaction tax (STT), at 0.017 per cent (that is, Rs 17 for every Rs 100,000 transacted) on comexes. All stakeholders in commodity trade have opposed the move.
There is a buzz that the government may halve the CTT to 0.08 per cent. However, Khatua said even such a move would affect volumes on domestic comexes heavily.
Experts believe that the implementation of the CTT has been deferred as the government has not yet come out with the required notification. At present, commodity broking firms charge clients 2-3 paise for every Rs 100,000 transacted. However, even if the revised rate of tax is levied, the transaction cost will go up more than 800 times.
Citing the example of wheat, which the government banned last year, Khatua said,
