What is Commodities Transaction Tax (CTT)?

Do you guys know about the Securities Transaction Tax (STT)?

If you don’t know into the deep then you can our blog on “How to Calculate STT Charges”

For just now to know STT is the charge that is levied by the government for the trading transaction made on the equities.

Like them, this is the Commodity Transaction Tax (CTT) that is also levied by the government for the trading in the commodities.

It is the regulatory charge taken by the government from the traders or the investors of the Commodity market.

This tax is only implied on the domestic commodity derivative exchanges.

In this article, you will come across the word “What is Commodities Transaction Tax (CTT)? “

In brief will discuss about this tax and also about the introduction and the calculations.

Let’s start with the Introduction of the Tax:

Introduction of Commodity Transaction Tax (CTT)

The concept of this tax was firstly introduced in the Union Budget 2008-09 as the part of the speech.

The proposal was to imply the charges on the commodity market on the domestic level.

After the proposal was introduced, many of the individuals were not agree to it as because at that time they define that the commodity trading in India was in an early stage and the introduction of CTT will impact them.

However, then when the commodity market took a upward moving then again in the year 2013, they had again proposed for the CTT.

The proposal of CTT was only on the non-agricultural commodities and in that year the bill was passed and CTT levied on the domestic commodity market from 1 July, 2013.

The Non-Agricultural commodities were Silver, Gold, Aluminum, Crude oil and many more and the tax rate was 0.01%.

Now this was all about the introduction of Commodity Transaction Tax (CTT)

Let us see the calculation for the same.

Commodity Transaction Tax (CTT) Calculations

This charge of Commodity Transaction Tax is implied on the turnover of Rs 10 per lakh and it is charged only to the sell side turnover.

Suppose, the Buy turnover is around 10 lakh and the Sell side turnover is around 20 lakh then, the CTT will be charged at 2 lakhs at the rate of 0.01% the amount will be 20o Rs.

You can calculate the CTT liability for the commodities transaction on the Commodity Brokerage Calculator.

One more time repeating: – CTT is only applicable to the Non-Agricultural Commodities.

No CTT charges are applicable to the agricultural commodities.

Do you know how this CTT impacts on the trading volumes?

If no, then we will take this topic now to make you understand on the same.

Impact of CTT on Trading Volumes

After the introduction of the CTT in the commodity trading, the trading volumes on the MCX and on the other commodity exchange in India has seen a risen in the volumes as high as 50-60%.

Through this introduction of the CTT, the smaller segments of the volumes contributors has been driven away as it has become more expensive for them.

Let’s summarize the points you have learned from this topic

Summary

CTT stands for Commodities Transaction Tax.

This tax is only levied on the non-agricultural commodities at a rate of 0.01% of the value of per lakhs.

This tax is to be paid by the sell side turnover.

The value depends upon the notional value of the trade that is based on the lot size and the applicable transaction price.

Non-Agricultural Commodities like gold, silve4r, base metals, copper, aluminum, oils and many more are the commodities that need to be paid the CTT charges of 0.01%.

In spot commodities, you did not need to pay the CTT charges.

These charges are only implied for the domestic commodity exchange transaction as it is implied by the country government and is specific for the country.

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Prashant Raut is a successful professional stock market trader. He is an expert in understanding and analyzing technical charts. With his 8 years of experience and expertise, he delivers webinars on stock market concepts. He also bags the ‘Golden Book of World Record’ for having the highest number of people attending his webinar on share trading.