Financial Daily from THE HINDU group of publications
Saturday, Jun 12, 2004
Agri-Biz & Commodities
NCDEX offers sellers provisions to deliver in 7 commodities
Mumbai , June 11
THE National Commodity & Derivative Exchange (NCDEX) has introduced "seller's right to deliver" provision in seven commodities for all the contracts expiring from this month onwards.
These commodities are rubber, pepper, guarseed, jute, chana, kilo gold and mega silver.
Under this provision, sellers will have two choices i.e. opt to deliver and opt not to deliver.
Under the first option, a seller with open position will have the right to decide to deliver the commodities. The buyer with corresponding open position will have no choice but to take delivery of the same. The seller can deliver the commodities at any of the delivery locations specified as delivery centres by the exchange for a given commodity.
Under the second option, the seller may opt not to exercise his right and consequently opt not to deliver. The open position of a seller who does not opt for delivery, will be settled by cash together with penalty as prescribed by the exchange from time-to-time.
Regarding the impact of `seller's right to deliver' on buyers, an exchange official said: "These provisions are applicable to both members category trading and clearing members. Seller's right to deliver can impact the buyers in several ways."
Firstly, the buyer may have to obtain sales tax registration in the State where the commodities are delivered in order to sell them. Secondly, if the buyer does not wish to sell the commodities within the State, he will have to take physical delivery of the commodities as specified in the regulations of the exchange and transfer them to his branch, warehouse or agent outside the State of delivery centre.
In such an event the sales tax paid on local purchases may be lost (depending upon the local sales tax provisions prevailing at the place of delivery centre).
The buyer may be liable to pay entry tax, octroi or cess when he transfers the commodities to the destination State. He will have to comply with the check-post provisions in the State from where the commodities are moved as well as in the destination State.
Thirdly, the buyer will have to comply with the provisions of the Central Sales Tax Act, 1956 in the case of inter-state stock transfers.
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