Montek wants PC’s pet CTT to be replaced by revenue-neutral tax

Stating that the futures market has not contributed to the current price rise, Planning Commission deputy chairman Montek Singh Ahluwalia today favoured withdrawal of the commodity transaction tax (CTT) introduced by finance minister P Chidambaram in this year’s Budget. He suggested replacing the CTT by a non-distortionary tax, such as an increase in income-tax surcharge, to make it revenue neutral.

Addressing a seminar on taxation of transactions organised by the Invest India Economic Forum and independent think tank National Institute of Public Finance and Policy, he said, “Revenue is an important consideration. The industry should think of means by which the government can make up for the loss of revenue (if it were to withdraw the CTT) from some other means, say by a tax that is non-distortionary, such as an increase in the surcharge on income-tax.”

He said it is still the view within the government that well-functioning markets are a necessity and there is a need for proper price discovery. “There shouldn’t be interference with the functioning of markets,” he said. “Insulating domestic agricultural prices from world prices is not the solution.”