Government likely to scrap CTT in new budget

The government is likely to withdraw the commodity transaction tax (CTT), which was proposed by finance minister P Chidambaram in his 2008-09 budget but was not levied due to stiff resistance from the commodity market regulator Forward Markets Commission (FMC).

Finance ministry sources said FMC's request is under its consideration and the ministry may withdraw the tax proposal in the budget to be announced on 6 July.

Reports quoted B C Khatua, chairman of the Forward Markets Commission, as saying that the regulator had already written to finance ministry seeking abolition of CTT.

"In the pre-budget memorandum, we have proposed to remove CTT for the future growth of the commodity market," he was quoted as saying.

Other industry chambers like FICCI have also sought withdrawal of CTT as they say, its imposition would only encourage "dabba trading" (grey market operations).

Under the CTT, proposed on the lines of the securities transactions tax (STT) in the 2008-09 budget, CTT was fixed at 0.017 per cent of the option premium when a seller sells an option in goods or an option in commodity derivative. For the sale of any other commodity derivative, the seller would pay 0.017 per cent of the price at which commodity derivative is sold.

The buyer would also pay 0.125 per cent as CTT on the settlement price of the option if he sells an option in goods or option in commodity derivative, where option in commodity derivative, where option is exercised.