In a significant move to enhance transparency and curb speculative trading in the commodities market, the Government of India has introduced the Commodity Transaction Tax (CTT), effective August 1, 2025. This tax mirrors the Securities Transaction Tax (STT) levied on equity trades and aims to streamline tax collection while regulating derivatives trading in commodities.
✅ Applicability: CTT will apply to non-agricultural commodity derivative contracts traded on recognized commodity exchanges.
💼 Rate: A 0.01% tax will be levied on the seller of commodity futures contracts.
📊 Exemptions: Agricultural commodities and physical delivery contracts are exempt from CTT.
🔍 Purpose: Discourage excessive speculation, increase tax compliance, and bring parity with financial markets.
The government stated that speculative trading in commodity markets often results in price volatility, hurting both consumers and genuine hedgers. CTT is expected to:
Improve market discipline
Ensure better tracking of transactions
Generate additional revenue for the exchequer
While traders and brokers have expressed concerns about increased transaction costs, policy analysts and economists believe it will professionalize the sector and align India's commodity markets with global practices.
The new regulation will come into force from August 1, 2025.
Market participants are advised to:
Update their accounting systems
Reconfigure trading platforms
Inform clients and revise contract terms where needed
With this reform, the Indian government continues its push for transparent, accountable, and disciplined financial markets. Traders should brace for this change and ensure timely compliance to avoid penalties.