Commodities Transaction Tax (CTT)

Commodities Transaction Tax (CTT) is a tax which is charged on exchange-traded commodity and its derivatives in India like the Securities Transaction Tax(STT). It was first conceptualised in the Union Budget of 2008-09.

It is also a type of financial transaction tax. A distinct provision has been made in the Finance Act of 2013 for CTT.

At the time of introduction, it was proposed to be levied at 0.017% but it was eventually held back as the market was still fresh from the recent global crisis and had it been imposed, then there would have been a severe impact on the commodity derivative product market in India. However, it was re-introduced in the non-agricultural commodity the rate of 0.01% in the Union Budget of 2014-15.

The Aim of CTT is to decrease the price volatility and increase the tax based revenue of the government.

Commodities Transaction Tax is charged on the value of taxable commodities:

  • Any sale of an option in commodity derivative
  • Any sale of an option(where the option is exercised) in commodity derivative.
  • When any other commodity is sold.

Scope of CTT

The rule related to CTT are published by the Department of Revenue, Ministry of Finance.

Currently, only 23 agricultural products are in the CTT exempted list. In 2015 the list was revised and the number of exempted commodities became 61.

As per the estimates of the Finance Ministry CTT is expected to generate revenue of Rs. 45 billion. Successful implementation of CTT will lead to transparency in the commodity exchange market but at the same time would also increase the transaction costs of the traded commodities as the traders will already be paying other taxes which they pay normally.

Traders had to pay some amount of the traded commodity as brokerage but with the introduction of CTT will increase the transaction cost of trading in non-agriculture commodities.

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