October 12, 2008

ASSOCHAM urges centre to withdraw CTT

Associated Chambers of Commerce and Industry of India has stated that the commodity transaction tax will render commodities markets unviable and therefore should be withdrawn. In addition, it has sought withdrawal of 5% hike in short term capital gains tax, excise levy on bulk cement imposed in 2008-09 budget and reduction of 4% across the board excise duty for small and medium enterprises.

Mr Venugopal N Dhoot president of ASSOCHAM has emphasized that the current turnover of all commodities exchanges taken together is around INR 4,000,000 crore per annum. If CTT is imposed at 0.017% and the turnover remains at current level, the maximum revenue collection would be INR 680 crore. He added that "If the turnover drops to the level of 10% of the current figure, the revenue collections would drop to INR 68 crore per annum only. Therefore, the CTT is uncalled for as with its imposition, the annual turnover of commodities exchange is bound to fall down and government is unlikely to collect much of revenues through CTT. Therefore, this be dropped."

Mr Dhoot has urged the finance minister to reconsider his decision for imposing 15% short term capital gains tax on Indian Inc in budget proposals for 2008-09 from 10% and bring back the ceiling to previous levels of 10% only. He argued that since a very few sops have been availed to Indian Inc in budget of 2008-09, increasing short term capital gains tax by 5% would be an additional burden on it and therefore, it should be revoked.

He said that similarly, excise on bulk cement has been increased by INR 50 per tonne while that on clinker, it has been hiked by INR 100 per tonne. The cement industry alone would not be adversely affected by it but it would have a cascading impact on the entire real estate sector as cement manufacturers would pass on this burden to end users only.

He also made a strong case for withdrawal of Commodity Transaction Tax, pleading that commodities trading would have an adverse impact due to impose of this tax which should be withdrawn immediately, as commodities market have started growing up from its nascent stage.

On the issue of mineral wealth exports, particularly those of iron ore, the ASSOCHAM holds that steel sector might witness a price hike as internationally, steel prices are set to rise and as a matter of fact have been rising. Therefore, a heavy export duty on mineral wealth is called for. In case, heavy export duty is not possible on ore exports, another suggested alternative is a cess which should be INR 500 per tonne.