Budget time is approaching again. there is talk of new TAXES. And now it appears that the Finance Ministry is keen on levying a tax on all transactions on the commodity exchanges. The rationale: it’s a natural corollary to the Securities Transaction Tax (STT), imposed in 2004.
- Finance Ministry considering tax on commodity exchange transactions
- Could affect long-term market development
- Revenue consideration cannot be ignored, since similar tax in the securities market has mopped up Rs 5,000 crore already
The logic from the revenue collection point of view may be compelling, particularly after what the STT impost has yielded. Till mid-November this fiscal, it had poured Rs 4,924 crore into government coffers.
Market players, though, are sceptical about the usefulness of such an impost especially in context of the development focus of the present government on agriculture. They feel that the capital and commodity markets cannot strictly be compared.
“In commodities trading, the cash market is fragmented and inefficient and the futures market has a short history,” says Joseph Massey, Deputy Managing Director, Multi Commodities Exchange of India (MCX). A trade-off between revenues and market building?