Inflation fears may delay CTT

[N.Sukumar]

The implementation of the commodities transaction tax (CTT) is likely
to be delayed to the end of the year or even next year, thanks to the
spiralling inflation and its political fallout.


The tax, the only new one imposed in this year's Budget, is yet to be
notified, despite the Finance Bill being approved by Parliament on
April 29.

A North Block source said the finance ministry would review the
situation in August before deciding whether or not to notify the tax.
Even if it decided to go ahead with it, the actual implementation
might not happen till the end of the current year.

"The decision to implement will have to be taken at the political
level as the overall economic situation is not favourable. This
assumes more significance as foodgrain and commodity prices are on the
rise," he added.

In order to keep food prices under check, the Centre has gone full
stream ahead to procure foodgrain from farmers to fill its silos. If
the CTT is implemented now, it could lead to hoarding in the short run
and throw a spanner in the government's game plan, the official said.

By September or October this year, the government will have a better
assessment of the current year's kharif harvest. A decision will be
taken only after that, he added.

The delay will come as some relief to commodity traders, who were
bitterly opposed to the tax and blamed it for a fall in their trading
margins as well as for hoarding of commodities.

The tax is to be levied at the rate of 0.017 per cent on the sellers
of commodity futures as well as options. The rate is 0.125 per cent
for buyers of options, who have exercised the option.

With the delay, the exchequer stands to lose a significant part of the
Rs 5,000-crore collection estimated from this new direct tax in
2008-09. With no clarity on its implementation, the Central Board of
Direct Taxes has made no official projection for the expected
collections from this proposed impost.

N.Sukumar
Research Analyst
www.kences1.blogspot.coom