A new tax called Commodities Transaction Tax (CTT) is proposed to be levied on taxable commodities transactions entered into in a recognised association.

It is proposed to define ‘taxable commodities transaction’ to mean a transaction of sale of commodity derivatives in respect of commodities, other than agricultural commodities, traded in recognised associations.

The tax is proposed to be levied at the rate, given in the Table below, on taxable commodities transactions undertaken by the seller as indicated hereunder:-

TABLE

S.No.

Taxable commodities transaction

Rate

Payable by

(1) (2) (3) (4)
1.

Sale of commodity derivative

0.01 per cent

Seller

 The provisions with regard to collection and recovery of CTT, furnishing of returns, assessment procedure, power of assessing officer, chargeability of interest, levy of penalty, institution of prosecution, filing of appeal, power to the Central Government, etc. have also been provided.

This tax is proposed to be levied from the date on which Chapter VII of the Finance Bill, 2013 comes into force by way of notification in the Official Gazette by the Central Government.

Further, it is proposed to amend section 36 of the Income-tax Act to provide that an amount equal to the commodities transaction tax paid by the assessee in respect of the taxable commodities transactions entered into in the course of his business during the previous year shall be allowable as deduction, if the income arising from such taxable commodities transactions is included in the income computed under the head “Profits and gains of business or profession”.

It is also proposed to insert an Explanation to provide that for the purposes of this clause, the expressions “commodities transaction tax” and “taxable commodities transaction” shall have the meanings respectively assigned to them under Chapter VII of the Finance Act, 2013.

This amendment in section 36 of the Income-tax Act will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years.

RELATED PRESS RELEASE

COMMODITIES TRANSACTION TAX (CTT) INTRODUCED IN A LIMITED WAY;
AGRICULTURAL COMMODITIES WILL BE EXEMPT

New Delhi, February 28, 2013 

The Finance Bill 2013 proposes to introduce Commodities Transaction Tax(CTT) in a limited way. Presenting the Union Budget in the Lok Sabha today, the Finance Minister Shri P.Chidambaram said that CTT shall be levied on non-agricultural commodities future contracts at the same rate as on equity futures that is at 0.01 percent of the price of the trade. The trading in commodity derivatives will not be considered as a ‘speculative transaction’ and CTT shall be allowed as deduction if the income from such transaction forms part of business income.

Mr. Chidambaram also said that there is no distinction between derivative trading in the securities market and derivative trading in the commodities market, only the underlying asset is different. Hence, it is time to introduce CTT in a limited way. However, agricultural commodities will be exempt.

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