Two days after Finance Minister P Chidambaram announced the introduction of the Commodities Transaction Tax on futures trading, opposition to the proposal is increasing day by day.
Chidambaram proposed in the annual Budget on Friday that CTT would be introduced on commodity futures trading on the lines of stock trading in India.
But commodity brokers and exchanges have come out against the tax saying it would dampen the futures market which is already in a sluggish phase.
On Sunday, exchanges and brokers got support against CTT from the apex commodities market regulator--the Forward Markets Commission. The regulator said that it would take up the demand for CTT withdrawal with finance minister Chidambaram.
"We will take up the issue with the Government," FMC Chairman B C Khatua told reporters.
He said the demand from exchanges and brokers is justified. "The commodity market is a very different market and unlike the stock market. The introduction of CTT is totally unjustified," Khatua said.
"We will take up the matter with the Government and try to resolve the issue before April 1," Khatua said, adding that it has received representations from exchange users, exporters importers and farm producers over the issue.
"CTT will have an adverse impact on the futures markets. It would virtually kill the growth story of 23 commodity exchanges in the country," Khatua said.
Traders and analysts have pointed out that the commodities transaction tax would make Indian market unusable for risk management. The budget has added an incidence of 12 per cent service charge and Rs 17 per lakh for commodities trading, which will increase the cost by over 800 per cent.
