Friday, March 1st 02:45 PM IST

India CTT may trim Gold, Silver futures volumes by up to 40%

# India budget  # silver  # CTT  # gold  # MCX  

Country's leading commodity exchange MCX described the move as discriminatory as it will increase trading costs for these futures substantially.

NEW DELHI(BullionStreet) : India's decision to impose a 0.01percent commodities transaction tax (CTT) on non agri futures is widely criticized by the trading community of the country.

From April 1 onwards, a commodities transaction tax of Rs 10 per lakh, or 0.01%, will be imposed on sellers of non-farm commodities such as gold and silver, which some market experts said could lead to a 30-40% decline in commodity futures volumes

Country's leading commodity exchange MCX described the move as discriminatory as it will increase trading costs for these futures substantially.

MCX Managing Director and CEO, Shreekant Javalgekar said the currency markets were 500 per cent bigger than the commodities markets, yet there was no transaction tax levied on them, which was discriminatory.

Gold ETFs too had been charged at 0.001 per cent as against 0.01 per cent for gold futures traded on the commodity futures markets.

Analysts said some investors and punters in commodities will be forced to exit the futures market in droves or shift part of their funds to agri commodity futures.

CTT on Indian commodity exchanges will increase the transaction cost by more than 300 per cent on an average, they added.

The commodity futures markets have created nearly 10 lakh jobs in non-urban areas, which are also under threat now. This is also expected to be inflationary as spot market and futures market move in tandem

Analysts added that besides raising trading costs, CTT is seen to be most detrimental for MCX, the country's largest commodity futures bourse with an 80% market share.

Analysts claim this would puncture volumes as 50-60% of liquidity in the commodity futures market is contributed by retailers who trade on wafer-thin margins

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