Commodities Transaction Tax (CTT) was introduced in the Finance Act 2013 and applicable with effect from 1st July, 2013. As per notification uploaded on www.incometaxindia.gov.in, CTT on the transactions executed on the Exchange shall be charged by NCDEX and collected by NCCL at the rate mentioned below:
|Sr. No||Taxable Commodities Transaction||Rate||Payable by|
|1||Sale of a commodity derivative||0.01 per cent||Seller|
|2||Sale of an option on commodity derivative||0.05 per cent||Seller|
|3||Sale of an option on commodity derivative, where option is exercised||0.0001 per cent||Purchaser|
Procedure for levy and collection of CTT for the members:
i. CTT shall be determined at the end of each trading day.
ii. For the purpose of calculation of CTT, transactions shall be identified based on the client code entered by the members at the time of order entry on the Exchange trading system and as may be modified by the member using the client code modification facility provided by the Exchange within the prescribed time. In respect of proprietary transactions the member code shall be deemed to be the client code.
iii. The value of taxable commodities transaction shall be determined with respect to the transaction executed under a particular client codes. Therefore, the Exchange shall only reckon the client code entered by the member while placing the order or as may be modified within the prescribed time. It is therefore imperative that members exercise extreme caution and diligence while entering the client code at the time of entering an order.
iv. For each client code, all the sell transactions for a trading day shall be aggregated at contract level.
v. For the purpose of CTT, each futures trade shall be valued at the actual traded price and option trade shall be valued at premium. On this value, the CTT rate as prescribed shall be applied to determine the CTT liability. In case of final exercise of an option contract CTT shall be levied on settlement price on the day of exercise if the option contract is in the money.
vi. The value of taxable commodities transaction shall be:-
a. in the case of a taxable commodities transaction relating to a commodity derivative, shall be the price at which the commodity derivative is traded;
b. in the case of a taxable commodities transaction relating to an option on commodity derivative, shall be—
– the option premium, in respect of transaction at serial number 2 of the Table above
– the settlement price (Strike Price), in respect of transaction at serial number 3 of the Table above
vii. The trading member’s CTT liability shall be the aggregate CTT liability of clients trading through them and the clearing member’s CTT liability shall be the aggregate CTT liability of all trading members clearing under him
Reports on CTT liability – A report shall be provided to the members at the end of each trading day. This report shall contain information on the total CTT liability, trading member wise CTT liability, client wise CTT liability and the detailed computations for determining the client wise CTT liability.
Pay-in of funds – The CTT amount shall be collected from the Clearing Member on T+1. The CTT amount shall be collected as per the timelines stipulated for the funds pay-in. A separate transaction shall be created and the amount shall be collected from the settlement account of members through their clearing banks as per the process currently followed in respect of settlement obligations.
Failure to pay funds – Non-payment of CTT will be treated as non-fulfilment of settlement obligations for the purpose of all consequential actions against the member.
Information to clients – The contract notes issued to clients by the members on a daily basis should specify the total commodities transaction tax for the transactions mentioned therein. Members may issue the CTT details on annual basis (within one month from the close of the financial year) to their respective clients, unless required by the clients otherwise.
Members are also advised to peruse the Chapter VII of Finance Act, 2013 & CTT Rules, 2013 and the provisions of the Finance Act 2018 for effective compliance of CTT and keep themselves updated on any amendments thereto.