Commodities Transaction Tax (CTT) on non-farm products

Commodities Transaction Tax (CTT) on non-farm products from July 1, 2013 As per an announcement made by the Central Board of Direct Taxes (CBDT), from July 1, 2013, the Commodities Transaction Tax (CTT) shall be levied on the derivative contracts of non-agricultural commodities which are transacted via recognized commodity bourses.

What is Commodities Transaction Tax (CTT):
Proposed in Finance Bill, 2013 for enhancing financial resources.
A tax which shall be levied on non-agricultural commodities futures contracts at the same rate as on equity futures that is at 0.01% of the price of the trade.
CTT would tax trading of non-farm commodities like gold, silver and non-ferrous metals such as copper and energy products like crude oil and natural gas in India.
CTT exempts 23 specified agricultural commodities which include wheat, turmeric, soya bean, red chilli, mustard seed, potato, pepper, cotton, cotton seed, coriander, copra, channa, castor seed, cardamom, barley and almond.
All the processed agricultural items such as guar gum, soya oil and sugar are subject to the CTT on future contracts.
Here both parties—buyer & seller of contract—will be taxed depending on the amount of contract size.
Similar to the Securities Transaction Tax (STT) levied on the purchase and sale of equities in the stock market.
So far, commodity transactions have been exempted from any levy.

What are the Advantages of levying CTT:
It will open up new resources for the augmentation of government finances.
CTT would generate revenues of around Rs.45 billion to government.
It is also aimed at bringing transparency in the commodity exchange market.

What could be the disadvantages of CTT:
CTT has been opposed by the experts and the PMEAC had also suggested against levying such a tax.
CTT will increase the transaction cost because traders already pay brokerage, deposit margin, brokerage, stamp duty and transaction charges.