GOOD READS

Commodity tax on budget agenda

New Delhi, Feb. 17: The finance ministry is considering imposing a transaction tax on commodity trading in the forthcoming budget to check the huge flow of money in this market.

The move is aimed at creating a level-playing field with the securities market, which has been paying transaction tax, introduced in 2004, at the rate of 0.1 per cent. Besides adding to the government's coffers, the securities transaction tax (STT) keeps track of the cash flowing into the stock markets and acts as a check on the black money being channelled into the bourses.

Marketmen have been lobbying the government for an equal treatment by either scrapping STT or imposing a commodities transaction tax (CTT). They feel the commodities market is unregulated and has many unexplained price variations because of speculative buying, at times funded by suspect money.

The proposal is to impose a 0.1 per cent CTT and a 0.17 per cent levy on commodity futures and options from this year's budget.

Chidambaram had first proposed to levy CTT in his budget for 2008-09.

In his budget speech of that year, Chidambaram had said: "Transactions in commodity futures have come of age. Hence, I propose to introduce the commodities transaction tax (CTT) on the same lines as STT on options and futures."

But he had to back down in the face of opposition from the food processing and consumer affairs ministry and the commodity exchanges.

Between April 2012 and January 2013, the government collected Rs 3,730 crore in STT, down nearly 10 per cent from previous year because of the volatility in the bourses. Officials estimate they can collect Rs 3,000-4,000 crore from CTT, if it is imposed, and another Rs 5,000 crore from STT in 2013-14.

"The point that we as tax administrators keep making is that commodities exchanges have huge volumes and are often difficult to tax. A CTT will help us keep track of the money flow and alert those who have been trying to funnel ill-gotten wealth into commodity bourses to stay away," officials said.

Tax administrators have the support of bankers and stock exchanges. At a pre-budget meeting with the finance minister, State Bank of India chairman Pratip Chaudhuri had argued that money, which would have normally gone into stocks, have shifted to the commodities market because of fewer checks and taxes on it.

On the other hand, the commodity exchanges are against the move. They are in favour of scrapping of STT instead of imposing CTT as they feel the levy will destroy the exchanges, which are still in their infancy.

Commodity exchanges have argued that the tax will not only push up costs but can also result in traders shifting to illegal trading platforms, known as "dabba' system, in market parlance. Taxing derivatives, according to the bourses, would be the most retrograde step with a few international precedents.

However, their arguments are not cutting much ice with the North Block. Chidambaram was widely criticised for introducing STT in his earlier stint as the finance minister of the UPA government, but the levy had little or no effect on trading volumes. Rather, it helped to regulate the market and brought in some revenues.

With the government strapped for cash, it's more likely that it will not scrap STT while bringing in CTT to rake in some extra revenues.

Quiz: How well do you know India's economy?

Question 1

Which of these products is India the world's largest producer of?

Poll Choice Options
  • Wheat
  • Rice
  • Milk
1
2
3
4
5
6
7
8
9
10

Latest News

  • Hyundai Motor Q1 profit unchanged; misses estimates

    South Korea's Hyundai Motor Co on Thursday missed analyst estimates by posting nearly flat net profit, as lacklustre U.S. performance offset increased sales in Korea and China. Hyundai, the world's fifth-biggest ... …

  • Apple resets the clock as investors await next big thing

    Apple Inc just bought itself some much-needed time. On Wednesday, the company surprised Wall Street with news that it sold more iPhones in the March quarter than even the most bullish analysts had expected. To top it all off, Apple unveiled a 7-for-1 stock split that should go down well with individuals who want a piece of a household name but could not afford to fork over $500 a share. The litany of positive numbers sent Apple's long-stagnant shares up 8 percent. …

  • Bharti Infratel Q4 net profit jumps 64 percent
    Bharti Infratel Q4 net profit jumps 64 percent

    Telecommunications tower operator Bharti Infratel Ltd reported a 64 percent jump in its quarterly profit, beating estimates on higher revenue from leasing mobile phone masts to phone carriers. Bharti Infratel, ... …

  • Facebook Q1 revenue grows 72 percent on rising mobile ads
    Facebook Q1 revenue grows 72 percent on rising mobile ads

    Facebook Inc's (FB.O) mobile advertising business accelerated in the first three months of the year, helping the Internet social networking company top Wall Street's financial targets. Shares of Facebook were up nearly 3 percent at $63.05 in after-hours trading on Wednesday. Facebook said that mobile ads represented 59 percent of its ad revenue in the first quarter, up from 30 percent in the year-ago period. Facebook's overall revenue grew 72 percent year-on-year to $2.5 billion in the first …

  • Apple expands buybacks by $30 billion, OKs 7-for-1 stock split
    Apple expands buybacks by $30 billion, OKs 7-for-1 stock split

    Apple Inc (AAPL.O) has approved another $30 billion in share buybacks till the end of 2015 and authorized a rarely seen seven-for-one stock split, addressing calls to share more of its cash hoard while broadening the stock's appeal to individual investors. Activist investor Carl Icahn, who had famously called on the iPhone maker to boost its buyback program, tweeted his approval of the move on Wednesday. On Wednesday, Apple reported sales of 43.7 million iPhones in the quarter ended March, …

IN-DEPTH ANALYSIS & INTERVIEWS

  • Too good to be true?

    Developers are offering lucrative buyback schemes. But such promises may not be always kept. …

  • Leaderspeak with Vikram Limaye

    Vikram Limaye MD & CEO, IDFC Ltd shares many firsts from his life. …

  • Appy Voting

    Mobile and online apps, seeking to inform or influence voters, have been more active than ever before in this election. …

  • In the crosshairs

    Why the future of FDI in multi-brand retail looks bleak after the polls. …

  • A Samurai from Chandigarh

    Advertising veteran Sandeep Goyal is disarmingly frank as he recounts his years with Dentsu. …

  • People business

    Featuring: Jason Sadler, Sebastien Bazin, Vikram Malhotra, Mark Goodburn, Bruce Poon Tip and C.K. Kumaravel …

  • Going to Extremes

    Mukund Mohan, whom Microsoft recently relocated from Bangalore to Redmond to build Microsoft Ventures in the US, is a dream mentor for entrepreneurs. …

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    16.52-0.33-1.96%
    UNITECH.BO
    14.31-0.27-1.85%
    SUZLON.BO
    120.40+7.00+6.17%
    FRL.BO
    66.05+4.10+6.62%
    MANGCHEM.BO
    54.40+1.65+3.13%
    HCLINFO.BO
  • Price % Gainers
    Price % Gainers
    NamePriceChange% Chg
    16.20+2.70+20.00%
    JAGSONPH.BO
    53.50+8.90+19.96%
    RUSHIL.BO
    40.45+6.45+18.97%
    RCIIND.BO
    63.95+8.90+16.17%
    MRPL.BO
    24.00+3.10+14.83%
    NELCAST.BO
  • Price % Losers
    Price % Losers
    NamePriceChange% Chg
    -10.95-100.00%
    4THGEN.BO
    -17.30-100.00%
    ALFAICA.BO
    -16.81-100.00%
    AMAL.BO
    -11.73-100.00%
    BORAX.BO
    -29.95-100.00%
    BRADYM.BO
  •  
    Recent Quotes
    Symbol Price Change % ChgChart 
    Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
    You need to enable your browser cookies to view your most recent quotes.
  • Recent Quotes News

    •  
      Sign-in to view quotes in your portfolios.