Parveen Kumar Singhal, joint MD, MCX
Removal of Commodity Transaction Tax (CTT). Non-agricultural commodities should not be subjected to CTT as is the case with agricultural commodities, as these contracts help SMEs to hedge in rupee denominated contracts in an effective manner on domestic exchanges. Increased cost impaired not only price discovery and market efficiency, but also denied socio-economic benefits to commodity value chain. CTT increased the cost of trading of exchange traded derivatives trading by almost 300%. CTT is levied at Rs 1000 per crore on sale side as against about Rs180 per crore on each side of trade charged by commodity exchanges. There has been more than 50% reduction in trading volumes after introduction of CTT. High trading cost has substantially increased the impact cost. The bid-ask spread for commodities like gold has increased from Rs.1.5-2 to Rs.5-7 per 10 grams, which was earlier lower than COMEX has substantially increased and India lost the opportunity of becoming price setter. The rising trading costs has also encouraged migration of financial businesses to offshore centers like Dubai and Singapore, lured by low cost and zero taxes. For instance, major jewellery exporters and bullion importers have started hedging their requirements in international exchanges like COMEX (CME Group), while speculative interest in bullion has also getting migrating to exchanges like Dubai Gold & Commodity Exchange (DGCX), which launched gold and silver contracts linked to Indian prices, and moreover, there is no imposition of CTT. There has been spurt in illegal (dabba) trading, which was 3 times the size of regulated market even before CTT was introduced, according to Nielsen study (2013). Amendment to the definition, Central Excise Rules, 2002 such that Cenvat credit should be allowed for the first removal of excisable goods from exchange designated warehouse after initial deposition in the same warehouse to encourage delivery based transactions in excisable goods on commodity exchanges. The above facility may be carried under the proposed GST regime also.
A foreign stock exchange/depository/banking company/insurance company/public financial institution may be allowed to hold upto 15% of the paid up equity capital of recognised stock exchanges as being allowed in the case of such domestic entities (Section 17(2) of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012.
Mr. Rohit Gadia, Founder & CEO, CapitalVia Global Research:
There are huge expectations from the government, as already the international markets are keeping Indian economy on edges, Thus all eyes are set on the budget which can bring some shine back on the Dalal street.
One of the major expectation of the industry is smoothening of administrative procedures around refund claims and valuations which are plagued with inordinate delays in assessments coupled with huge revenue deposits which result in uncertainty and blockage of working capital for companies. The Government should focus on these aspects. This will give boost to start-up India initiative as due to delays in these procedure many start-ups die an eventually death. Reduction in Corporate Tax is expected to promote the business environment as it is unfavourable as compared to other emerging economies.
Considering the increase in cost of living, we may expect rise in the current basic exemption limit of 2.5 lakh to Rs. 3 lakh. Government is looking for innovative approaches for creating more incentives in investing in long term equity markets. We believe the consequent revival in economic activity will further bolster India’s position as one of the fastest growing economies in the world.
Demands such as lowering of securities transaction tax (STT) or removal of dividend distribution tax might also remain unmet. Strained tax receipts given the general economic slowdown, implementation of the seventh pay commission, need to boost the rural economy after two years of subnormal monsoon and necessity of infrastructure and social investments place increased demands on the expenditure side. Thus, the Union Budget 2016-17 has an important task to keep up the positive economic outlook of India by bringing in major indirect tax reforms and addressing business concerns. In addition, the passing of Constitutional Amendment Bill for GST in this budget session, will not only help the Government to set up a positive environment but also will be a giant step towards reinforcing the perception about India as the next investment destination.[/vc_column_text][/vc_column][/vc_row]
Opening Statement by Prime Minister of India at 15th ASEAN-India Summit, Manila Your Excellency President …