The Hindu Business Line : Commodity bourses oppose move to impose additional levy

Chennai, March 19 A proposal by the Forward Markets Commission (FMC) to impose an additional levy of Rs 60 per crore has hit a hurdle with commodity exchanges opposing it on the grounds that it would be too much of burden on investors.

“The FMC discussed this issue (of levy) but this will looked at only after the issue of commodity turnover tax (CTT) is settled,” said Mr P.H. Ravikumar, Managing Director and Chief Executive Office of NCDEX.

The FMC had wanted to impose the levy on the lines of the Securities and Exchange Board of India (SEBI) to raise funds for its functioning.

The FMC has become an autonomous body with the passing of an ordinance by the Centre last month.

It is set to be made final through the passage of an amendment to the Forward Contracts (Regulation) Act by Parliament.

The amendment was introduced in the Lok Sabha last week through a Bill.

According to an MCX official, the commodity exchanges have pointed out that commodity futures were at a nascent stage in the country and any move to impose additional levy would hurt badly.

Already, the proposed 0.017 per cent CTT is seen increasing the transaction costs from Rs 3 per lakh to Rs 20.50. Such a move would pave way for investors to move over to other commodity exchanges in either Shanghai or Tokyo Commodity Exchange or COMEX. It could also pave way for illegal trading, according a note prepared by MCX.

“The proposal for additional levy is like asking a tax payer to pay more tax. When a tax payer is burdened like that he will stop paying tax,” said Mr Ravikumar. “CTT is the biggest issue for the commodity exchanges currently,” he said.

There was also an option for traders to altogether exit from the profession, the MCX note said.

According to analysts, the levy being proposed by FMC would actually result in a payout of Rs 67.68 per a turnover of Rs 1 crore after including the service tax.

Meanwhile, the Centre is gearing up to face the opposition over the issue of higher prices of essential commodities. Towards this, the Consumer Affairs Ministry had discussed the issue with the commodity exchanges, which are seen as the likely target of the Opposition and Left parties.

“After the Budget, it is usual for the Prime Minister’s Office to circulate notes on issues that are likely to be raised by the Opposition. This time, the notes included issues of price rise and demand for ban on futures of essential commodities. We have given our view on this,” said Mr Ravikumar.

According to sources, the FMC is likely to re-list wheat, rice and pulses futures soon. This is likely to happen once the amendment to the Forward Contracts (Regulation) Act is ratified by Parliament.

More Stories on : Commodity Exchanges | Taxation

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