Tax-free Sikkim is a Hub for Commodity Traders

Sikkim, a tiny state with a population of 6.58 lakh, is now an abode for commodity market speculators thanks to its special tax haven-like status. In February, the market share of Sikkim-based traders on the Multi Commodity Exchange (MCX) in Mumbai climbed to 5.5 percent from nil just over a couple of years ago.

Data show that MCX witnessed a total volume churn of over $110 billion on its platform during February, of which Sikkim’s share stood at over $6 billion.

The number of traders from the State, based on unique client code, has increased to 2,217 compared to 674 in February 2020.

In comparison, other densely populated States are seeing much less volume despite having a larger number of traders. Bihar, for example, has 2.88 lakh traders but accounts for only 1.51 percent of the trading volumes.

Kerala has 2.04 lakh traders but the volumes from the State are around 1.45 percent. Even Madhya Pradesh, which has 4.67 lakh traders, accounted for only 3.2 percent of volumes in February.

Experts informed that Sikkim’s newfound love for commodity speculation could be due to the exemption its residents get from the mandatory requirement of a Permanent Account Number (PAN), which allows them to skip filing tax returns.

More than 95 percent of the trading volume on MCX is concentrated in crude oil, gold, silver, and other base metals, the price discovery of which mainly happens abroad.

Hence, the activity of Sikkim-based traders on MCX was primarily speculative, experts say adding that traders in other States may be using Sikkim-based residents as a proxy to carry out these trades.

About MCX:

The Multi Commodity Exchange of India Limited (MCX), India's first listed exchange, is a cutting-edge commodity derivatives exchange that allows for online commodity derivatives trading and risk management.