| Commodity transaction tax on govt's agenda |
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New Delhi, 6 February The finance ministry is looking at taxing transactions on commodity exchanges to provide better regulation and monitoring of the market. The proposal is being considered for Budget 2013- 14, despite hectic lobbying by commodity exchanges and the consumer affairs ministry against the imposition of the tax. The proposed move was not intended to maximise the government's revenues, as it might not garner more than ₹ 3,000 crore a year, officials said. The ministry, instead, was looking at it for regulation, to bring in more transparency in commodity transactions on exchanges. "Commodity Transaction Tax ( CTT) has to come. Volumes in commodities transactions are huge and there is a need to track those transactions," said afinance ministry official, asking not to be named. He added, usually, people with substantial investible surplus transacted at commodity exchanges and there should not be a problem in paying tax. Officials, however, mentioned a final call would be taken by Finance Minister P Chidambaram, as there was a lot of political and industry pressure to drop the proposal. Proposed first by Chidambaram in Budget 2008- 09, the tax was never notified due to stiff opposition from the food processing & consumer affairs Ministry and commodity exchanges. The proposal was to levy 0.017 per cent tax on commodity derivatives trade, on the lines of the securities transaction tax ( STT). Commodity exchanges have cautioned the finance ministry the levy of the tax would be retrograde and push up transaction costs, forcing traders to shift to illegal ( dabba) trading system. In a representation to the finance ministry, they said exchangetraded commodity transactions were used as a hedging instrument against adverse price fluctuation and led to fair price discovery. "If the government's objective is to get tax revenue, volume will come down after CTT imposition. Where is the tax going to come from in that case," said an executive with a commodity exchange. He added various other state and local taxes were levied on commodity spot that were not imposed on transactions in equity cash segment. Stock exchanges and banks, on the other hand, are seeking a level playing field, arguing trade is shifting from equity market to commodity exchanges due to differential tax treatment. Currently, STT is levied on sale and purchase of equity, in the range of 0.017- 0.125 per cent. After a pre- Budget meeting with the finance minister, State Bank of India Chairman Pratip Chaudhuri had said much of the money that could have been invested in the stock market was going into the commodity market. He proposed either CTT be introduced or STT be abolished. At present, banks are not allowed to trade in commodity futures. If CTT is imposed, Multi Commodity Exchange, National Commodities and Derivatives Exchange, National Multi Commodity Exchange, Indian Commodity Exchange and Ace Derivatives and Commodity Exchange would be affected. A study by Icrier had found the introduction of a transaction tax would shoot up transaction cost and lead to higher volatility and lower trading activity. Despite lobbying by bourses, FinMin mulls tax to monitor the market MONITORING TRADE Aggregate turnover on exchange In ₹ lakh crore FY11 FY12 FY13* *Till Feb 5, 2013; For commodities ( MCX + NCDEX + NMCE), Equity market( BSE+ NSE) Data compiled by BS Research Bureau 116.34 339.21 178.53 356.17 143.29 356.60 RUN- UP TO THE |
BUDGET 2013- 14
| M& As in e- commerce |
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Mumbai, 6 February The consolidation taking place in the Indian e- commerce sector offers fresh hope for venture capital investors. Investors have been finding their money stuck as no exit routes are seen. Last year, there were about 18 mergers & acquisitions (M& As), worth $ 63 million, against 12 deals in the previous year. Investment banker- turned entrepreneur Falguni Nayar said, " It's a long process to establish the retail business. Similar to acquiring brands in consumer space, mergers give a strong foothold in the e- commerce space." Nayar, an investment banking veteran with two decades of experience with the Kotak Mahindra group, had launched Nykaa. com, a women- centric beauty and wellness e- commerce portal last year. According to her, merger of portfolios owned by the same investors will enable them to handle the business easily. Last month, private equity (PE) major SAIF Partners- backed fashion retail sites — Zovi and its rival Inkfruit — merged their business. The merged entity received $ 10 million from SAIF and Tiger Global, its existing investors. The examples of recent mergers have shown the fact that VC investors are keen to support the merged entities, where the business as well as the customer base becomes larger. Last month, SportsNest. com, an e- commerce venture offering sports goods and fitness products, merged with its competitor, PlayGroundOnline. com. The merged entity has raised undisclosed funding from Blume Ventures, existing investor of SportsNest. com. Prashanth Prakash, partner at Accel Partners, said, " Building a strong customer pool is very expensive and it makes sense to get a larger audience through these mergers." According to Prashanth, one the major challenges the e- commerce industry will witness is the lack of new funding. " Compared to the small players, larger merged entities can attract more PE/ VC funding in future," he said. He added that the risk also may be lesser when entities become larger. Last year, the sector saw a lukewarm response from VC investors, when the deal size went down to $340 million from $ 410 million in 2011. Although the number of deals went up by 20, decline in size shows the concern of investors over the sector, according to experts. Sachin Bansal, founder & CEO of Flipkart, said, " 2013 might be the year we see consolidation in the online shopping space as players combine their respective strengths, thus contributing to the improvement of the overall e- commerce ecosystem. This can only spell good news for the end user as offerings and services become smoother and more comprehensive." Leading M& A transactions in e- commerce include Concur TechCleartrip, GS Home Shopping- TV18 Home Shopping and Flipkart- eTree Marketing. Sachin Bansal, founder & chief executive officer, Flipkart Falguni Nayar, chief executive officer at Nykaa. com TOP M& A TRANSACTIONS IN E- COMMERCE Year Buyer Target Deal value ($ mn) 2011 Concur Technologies Inc Cleartrip Travel Services 40.0 2012 Awari Technologies Reindeer Software Solutions 30.0 2009 GS Home Shopping Inc TV18 Home Shopping Network 23.5 2012 Flipkart Online Services eTree Marketing 20.0 2012 Jasper Infotech Pvt Ltd eSportsbuy. com 9.7 Source: VCCEdge |
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