The Commodity Transaction Tax (CTT) is a levy imposed on the purchase and sale of commodity derivatives in India. Its primary purpose is to differentiate between derivative trading in the commodities market and the securities market.
The CTT was introduced by the erstwhile Finance Minister, Mr. P. Chidambaram, in the 2013-14 Union Budget.
Similar to the Securities Transaction Tax (STT), which applies to securities, the CTT is imposed on exchange-traded non-agricultural commodity derivatives. While agricultural commodities are exempted from CTT, non-agricultural commodities such as gold, silver, and other non-ferrous metals (including copper) are subject to this tax.
Additionally, energy products like crude oil and natural gas fall under the purview of the Commodity Transaction Tax.
CTT applies to individuals trading in commodities. It taxes commodity trading in India, where both the buyer and seller are taxed based on the contract size.
The CTT rate is 0.01% of the price of the trade on non-agricultural commodities futures contracts—the same rate as equity futures. The Commodity Transaction Tax can be deducted if the income from such transactions is shown as business income.
Like other financial transaction taxes, the CTT aims to discourage speculation prevalent in the market. By regulating commodity derivatives and generating revenue, it contributes to the overall stability of the financial system.
In summary, the Commodity Transaction Tax plays a role in balancing market dynamics and ensuring fair practices in commodity trading.
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