CTT rationalised on commodity derivatives to help MCX, NCDEX
, ET Bureau|
Updated: Feb 01, 2018, 05.45 PM IST
Rationalisation of commodity transaction tax introduced in FY2014 on commodity derivatives trades will help participants and potentially boost trades on exchanges like MCX and NCDEX.
CTT of 0.01% was collected from sellers of on non-farm and processed farm commodity derivatives. Those commodities which did not attract CTT were deemed to be speculative traders where losses or gains arising out of such trades could be set off only against other speculative profits or losses and not busines imcome.
This especially hurt agri hedgers who, to protect price risk, would take opposite positions on the derivatives markets to those they had taken on the physical market. However, since no CTT was paid on, say guar or soyabean futures, the losses incurred on the derivatives market could not be set off against their business income on the physical market.
Arun Jaitley in his Budget for FY19 has rectified that by introduction of a clause (e) to proviso 5 of Section 43. This says that non delivery commodity trades carried out on a recognised stock exchange or registered asssociation would not be treated as a speculative transaction. This will enable a hedger of agri produce to set off loss or gain on commodity exchanges against physical market profit or loss treated as business income.
In another significant move, which will help MCX and NCDEX, the CTT on devlovement of a commodity opttion -- converting option to futures position -- has been kept at 0.0001% and not 0.125% prevalent on options that are exercised.
Options in commodities, unlike in equities, are derived from their respective futures contracts as the spot market in agri is controlled by respective state governments. Gold options are based on gold futures. Anybody wishing to exercise a gold options has to convert it into a gold futures. On NCDEX, guar options are traded.
MCX stock closed up 0.44% at Rs 779.10 apiece.
CTT of 0.01% was collected from sellers of on non-farm and processed farm commodity derivatives. Those commodities which did not attract CTT were deemed to be speculative traders where losses or gains arising out of such trades could be set off only against other speculative profits or losses and not busines imcome.
This especially hurt agri hedgers who, to protect price risk, would take opposite positions on the derivatives markets to those they had taken on the physical market. However, since no CTT was paid on, say guar or soyabean futures, the losses incurred on the derivatives market could not be set off against their business income on the physical market.
Arun Jaitley in his Budget for FY19 has rectified that by introduction of a clause (e) to proviso 5 of Section 43. This says that non delivery commodity trades carried out on a recognised stock exchange or registered asssociation would not be treated as a speculative transaction. This will enable a hedger of agri produce to set off loss or gain on commodity exchanges against physical market profit or loss treated as business income.
In another significant move, which will help MCX and NCDEX, the CTT on devlovement of a commodity opttion -- converting option to futures position -- has been kept at 0.0001% and not 0.125% prevalent on options that are exercised.
Options in commodities, unlike in equities, are derived from their respective futures contracts as the spot market in agri is controlled by respective state governments. Gold options are based on gold futures. Anybody wishing to exercise a gold options has to convert it into a gold futures. On NCDEX, guar options are traded.
MCX stock closed up 0.44% at Rs 779.10 apiece.
