3rd May 2004, 08:07 AM
|
|
Member
|
|
Join Date: Mar 2004
Posts: 70
|
|
Commodity futures are in for a tax treat
Quote:
Commodity futures are in for a tax treat
G GANAPATHY SUBRAMANIAM
TIMES NEWS NETWORK[ MONDAY, MAY 03, 2004 12:27:33 AM ]
NEW DELHI: The Central Board of Direct Taxes (CBDT) is considering tax breaks for futures trading in commodities, on the basis of recommendations from the department of consumer affairs.
If the finance ministry accepts the demands of commodity exchanges, backed by the consumer affairs department, the sops may materialise in the full Budget for ’04-05, which is expected in July.
Representatives of the National Commodities & Derivatives Exchange (NCDEX), Multi-Commodity Exchange (MCX) and Ahmedabad Commodities Exchange had met finance ministry officials recently, to express their views on various issues relating to a favourable tax treatment for futures trading in commodities. The main contention of the commodity exchanges is that futures trading in commodities should be treated like an ‘industry’ rather than a speculative activity, senior government officials said.
Futures actually help in checking price volatility and associated risks, rather than leading to speculation, representatives from commodity exchanges said at the meeting.
The key demands of commodity exchanges include permission to set off losses made in futures contracts against normal business profits, carry forward losses for eight years and concessions for profits made by trading in international exchanges.
As of now tax concessions are not available for these activities, as they are treated as ‘speculative’ transactions. Carry forward of losses is allowed only if hedging through forward contracts is done against physical stocks. Tax breaks for futures transactions are significant for commodity exchanges, which have a turnover of around Rs 300 crore per day, since 95% of the deals are squared off, rather than being allowed to mature for delivery.
Archaic government rules do not even permit full hedging of export proceeds, and companies were not, till recently, allowed to enter into forward contracts in the international market for the purpose of hedging. Booking of import contracts was permitted only for actual deliveries, till the rules were modified recently.
The situation under which such rules were framed has undergone a sea change, representatives of commodity exchanges pointed out. The consumer affairs department and the Forward Markets Commission (FMC) support this view. Feeling the pinch, the corporate sector is also pushing for liberalised rules. Infosys, for example, is seeking permission to hedge its entire export proceeds to check exchange fluctuation from affecting its revenues. Another example is Air-India, which is keen to protect itself against a spurt in aviation fuel prices (ATF) by hedging this commodity in the global markets.
With the FMC’s permission, various commodity-specific markets have also come up, including the India Pepper and Spice Trade Association of Kochi; the SOPA Board of Trade in Bhopal for soyabean; The Bombay Oilseeds & Oils Exchange Limited International; Coffee Futures Exchange India of Bangalore; The Ahmedabad Seeds Merchants Association; The Kanpur Commodity Exchange (gur, potato and oilseeds); The Rajdhani Oils & Oilseeds Exchange of Delhi; Rajkot Seeds Oil & Bullion Merchants Association; The South India Cotton Association of Coimbatore; East India Cotton Association of Mumbai; and The East India Jute & Hessian Exchange of Kolkata.
|
|
Similar Threads for: Tax Rebates for Commodities Futures Trading?
