Commodities Transaction Tax

1 Commodities Transaction Tax (CTT) has been introduced vide Chapter VII of the Act and has come into force from 1st July, 2013 as notified vide Notification S.O. 1768(E) dated 19th June, 2013. The CTT Rules, 2013 have been notified vide Notification S.O. 1769 (E) dated 19th June, 2013. CTT is levied on taxable commodities transactions entered into in a recognized association.

2 ‘Taxable commodities transaction’ has been defined to mean a transaction of sale of commodity derivatives in respect of commodities other than agricultural commodities traded in recognised associations. CTT is to be collected on taxable commodities transactions by the recognised associations.

2.1 Agricultural commodities which are not liable to CTT are almond, barley, cardamom, castor seed, channa/gram, copra, coriander/dhaniya, cotton, cotton seed oilcake/kapasia khali, guar seed, isabgul seed, jeera, kapas, maize feed, pepper, potato, rape/mustard seed, raw jute, red chilli, soya bean/seed, soymeal, turmeric, wheat.

3 The tax is levied at the rate, given in the Table below, on taxable commodities transactions undertaken by the seller as indicated hereunder:-

S. No. Taxable commodities transaction Rate Payable by
(1) (2) (3) (4)
1. Sale of commodity derivative 0.01 per cent Seller

4 The provisions with regard to collection and recovery of CTT, furnishing of returns, assessment procedure, power of assessing officer, chargeability of interest, levy of penalty, institution of prosecution, filing of appeal, power to the Central Government, etc. have also been provided.

5 Further, section 36 of the Income-tax Act has been amended to provide that an amount equal to the commodities transaction tax paid by the assessee in respect of the taxable commodities transactions entered into in the course of his business during the previous year shall be allowable as deduction, if the income arising from such taxable commodities transactions is included in the income computed under the head ―Profits and gains of business or profession.

6.1 Sub-section (5) of section 43 of the Income-tax Act has also been amended to provide that eligible transaction in respect of trading in commodity derivatives carried out in a recognized association shall not be deemed to be speculative transaction. The eligible transaction shall include only those transactions in commodity derivatives which are subject to CTT. An Explanation has been inserted to provide that the expression “commodity derivative” shall have the meaning assigned to it under Chapter VII of the Act.

6.2 Applicability - The amendments in sections 36 and 43 of the Act take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years.