Leading commodity bourse Multi Commodity Exchange of India (MCX) on Friday urged the government to scrap Commodity Transaction Tax (CTT) and allow foreign stock bourse/ financial bodies to hold up to 15% stake in the recognised commodity bourse.
CTT, which is in place since July 1, 2013, is a tax levied on exchange-traded commodity derivatives in India on the lines of the Securities Transaction Tax (STT).
“Non-agricultural commodities should not be subjected to CTT as is the case with agricultural commodities, as these contracts help small and medium-sized enterprises (SMEs) to hedge in rupee-denominated contracts in an effective manner on domestic exchanges,” MCX said sharing its Budget 2016 wishlist for the 2016-17 fiscal.
CTT increases the cost of trading of exchange traded derivatives by almost 300%. There has been more than 50% reduction in trading volumes after the introduction of CTT, it said in a statement.
The rising trading costs have also encouraged migration of financial businesses to offshore centres like Dubai and Singapore, lured by low cost and zero taxes, it added.
That apart, MCX has sought the government to allow Central Value Added Tax (Cenvat) credit for the first removal of excisable goods from the exchange-designated warehouse after initial deposition in the same warehouse to encourage delivery-based transactions on commodity exchanges. The facility may be carried under the proposed Goods and Services Tax (GST) regime also.
MCX also demanded the government to allow a foreign stock exchange/depository/banking company/insurance company/public financial institution to hold up to 15% of the paid-up equity capital of recognised stock exchanges, the statement added.
Finance Minister Arun Jaitley will present Budget 2016 on February 29.