Suresh NairADMISI Commodities
The Union budget of 2015-16 will be one of the most anticipated events of 2015. There will expectation from the markets that the new government could bring in bolder reforms. One of them will be the Commodities transaction Tax (CTT).
Commodities transaction Tax (CTT) of Rs. 10 per lakh or 0.01% was levied by finance ministry on metals, bullion during the budget of 2013-2014. Later few processed agri commodities were also added to this list. This has led to a significant drop of volumes. MCX Exchange data revealed that the monthly average volumes fell from Rs. 60,204 crores in Feb 2013 to Rs. 24,508 crores in Feb 2015, a decline of about 60% in the last 2 years. NCDEX Exchange data revealed that the monthly average volumes fell from Rs. 3,972 crores in Feb 2013 to Rs. 3,102 crores in Feb 2015, a decline of about 22% in the last 2 years.
Furthermore to arrest the widening Current Account Deficit (CAD), the previous government had raised the gold import duty from 4% to 10%. Additionally, the government also introduced the 80-20 gold import norms even though the new government had recently withdrawn the rule. The Government had also banned imports of coins and medallions in 2013. These norms were successful to an extent, but caused a rise in unauthorized gold imports into the country.
Besides, gold imports have declined significantly over the past few months. According to official government data, India’s net gold imports were 662 MT during 2013-2014 and 625 MT during April 2014-November 2015 much lower from 1014 MT seen during 2012-2013.
In light of the recent developments, like falling oil prices, which could help reduce our import, bill in turn, helping us to reduce our CAD, there could be increasing expectations on finance minister from the industry to announce some relaxation in these measures during the budget.
The industry is expecting the government to lower import duty by at least 2-3% from the current 10%. We believe taking all the factors into consideration the industry expects the new finance minister to consider withdrawing CTT in order to increase the volumes.
We also believe that the government could give us a roadmap for the introduction of Goods and Services Tax (GST). Implementation of the GST will help to normalize multiple layers of taxation and could help align taxation of imports and exports appropriately. The implementation of GST will also help break the tax barriers currently existing between States.
Due to domestic and global Sugar glut, Sugar prices both domestically and internationally have been suppresed. Indian Sugar producers are not able to export surplus domestic Sugar due to higher cost of production. Sugar production costs in India are above Rs.32/Kg whereas current realisations are near Rs. 27/Kg. The Sugar industry has been demanding relief from the Central and State govenments to help them cope with this situation. It has demanded a Sugar export subsidy above Rs. 4000/MT so that surplus Sugar can be shipped out and inventories can be lowered. The Department of Food and Public Distribution has proposed a subsidy of around Rs 4,000/MT, which will be finally decided by the Union Cabinet for export of 1.4 million MT of Sugar.The export subsidy for raw sugar was revised to Rs. 3,371/MT for August-September 2014.
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