Nothing to gain

Feb 28 2013, 10:48 IST
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SummaryBroad-basing the transaction tax structure to include commodities will destroy commodity exchanges, adding nothing to the exchequer

livelihood of nearly two million families, or 10 million people, will be adversely affected. Not only will the exchequer not earn any revenues from CTT, its net revenues will decline drastically, following the loss in income and other taxes to both the Centre and states.

The editorial ignores the fact that, unlike stock market traders, commodity players don’t enjoy such tax benefits as concessional shot-term capital gains tax and zero long-term capital gains tax. The gains and losses from commodity derivative trades are also considered as speculative gains and losses, and are not allowed to be offset by other business losses or gains. Stock market players benefit from such offsets, as all their trades are regarded as hedging transactions, even though they are not. Moreover, unlike stock exchanges, institutional players, including banks, are not allowed to trade in commodity derivatives. Options and index trading are also not permitted on commodity exchanges. It requires no sixth sense to predict that broad-basing the transaction structure to include commodities and currencies will destroy commodity exchanges, without adding any coffers to the Central government. The fiscal deficit will only widen, with net loss in revenues, following falling incomes from the participants in the two markets.

The writer is founder and group chairman, Financial Technologies (India) Ltd

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