MULTI Commodity Exchange of India (MCX) will shortly make a final representation to excise authorities requesting a partial modification of excise regulations, which is expected to enable delivery of industrial commodities on the exchange platform.
Currently, bourses do not witness any delivery of industrial products such as copper, zinc, aluminium as financial investors and traders cannot pass on input credit to a purchaser who is taking delivery from an exchange-accredited warehouse. Rather, actual users hedge themselves on the platform and give or take delivery in the physical market.
In order to be able to pass on input credit to a purchaser, exchange traders and investors need to be excise-compliant, meaning they have to register with excise authorities, get excise numbers so that they can issue excisable invoices. However, exchange participants do not require input credit as they are usually not interested in taking delivery. Normally, when goods are deposited in the exchange warehouse, only the warehouse receipts are traded between the seller and the buyer; there is no actual movement of the goods outside the warehouse. However, under the current dispensation, delivery to an actual user is precluded by nonavailability of input credit.
The exchange has requested the excise authorities that it should be permitted to pass on the input credit to a purchaser upon movement of the goods outside the warehouse. This will enable the purchaser to avail of input credit and pay tax only on the value added, which is the concept of Cenvat.
For this, excise regulations will have to be modified. A government official involved in the discussion with the exchange confirmed that the latter has made submissions to the authorities and that a final representation for amendment to the regulations was due within a week or two. "Till now, a final representation has yet to be made by the exchange," said the official. "Once they make their case out to us, we will send it to higher authorities for consideration."
"We want to introduce deliveries in industrial commodities," said Joseph Massey, outgoing MD & CEO, MCX. "... If partial modification is carried out to the existing excise rule, India will be able to create a delivery mechanism in industrial commodities."
Currently, bourses do not witness any delivery of industrial products such as copper, zinc, aluminium as financial investors and traders cannot pass on input credit to a purchaser who is taking delivery from an exchange-accredited warehouse. Rather, actual users hedge themselves on the platform and give or take delivery in the physical market.
In order to be able to pass on input credit to a purchaser, exchange traders and investors need to be excise-compliant, meaning they have to register with excise authorities, get excise numbers so that they can issue excisable invoices. However, exchange participants do not require input credit as they are usually not interested in taking delivery. Normally, when goods are deposited in the exchange warehouse, only the warehouse receipts are traded between the seller and the buyer; there is no actual movement of the goods outside the warehouse. However, under the current dispensation, delivery to an actual user is precluded by nonavailability of input credit.
The exchange has requested the excise authorities that it should be permitted to pass on the input credit to a purchaser upon movement of the goods outside the warehouse. This will enable the purchaser to avail of input credit and pay tax only on the value added, which is the concept of Cenvat.
For this, excise regulations will have to be modified. A government official involved in the discussion with the exchange confirmed that the latter has made submissions to the authorities and that a final representation for amendment to the regulations was due within a week or two. "Till now, a final representation has yet to be made by the exchange," said the official. "Once they make their case out to us, we will send it to higher authorities for consideration."
"We want to introduce deliveries in industrial commodities," said Joseph Massey, outgoing MD & CEO, MCX. "... If partial modification is carried out to the existing excise rule, India will be able to create a delivery mechanism in industrial commodities."
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