Indian Transaction Taxes Causing Grief

by Mary Swire, Tax-News.com, Hong Kong

17 February 2012

Government plans to lower Securities Transaction Tax (STT) and re-impose Commodity Transaction Tax (CTT) have been attacked by exchanges.

It is widely believed that CTT would discourage trading and cause a loss of trading volumes. Commodity exchanges are concerned that profitability would therefore be negatively affected.

They have also expressed their concerns over potential job losses and their effects on society if the CTT was to be implemented. Expansion of the commodity derivatives industry is expected to provide a large number of jobs in the next five years, which would be put at risk if CTT was to be applied.

The current Securities Transaction Tax (STT), which is applied to equity markets, is also problematic. The industry would like to see it abolished completely, but there seems little chance of this. In the government's mind, any reduction in the tax would have to be paid for by the re-introduction of CTT, which was introduced in the 2008-09 budget, but rescinded in the following year after recommendations made by the Prime Minister’s Economic Advisory Council.

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