Much to the dismay of commodity traders and investors, the finance minister has introduced a commodity transaction tax (CTT) in the Union budget 2013-14.
For the first time, a CTT of 0.01 per cent has been levied on all non agri-commodities futures, which account for more than 80 per cent of the trading volumes on the exchanges. This will increase the cost of trading and lead to a fall in volumes. Small traders are likely to be the worst hit. "We expect volumes to tumble by 20 per cent in the commodity markets," says Naveen Mathur, Associate Director-Commodities & Currencies at Angel Broking. "I fear that the introduction of CTT may divert traders towards unauthorized and illegal trading," he adds.
Overall, it is a detrimental step for the commodity futures market which is still in its infancy.