The finance ministry on Tuesday formally accepted the recommendations of a committee on retrospective cases of Minimum Alternate Tax (MAT), headed by Law Commission chairman A P Shah. With this, the government will withdraw all past cases of MAT on foreign institutional investors ( FIIs).
The move came on a day when jittery investors offloaded shares, leading to a fall of about two per cent in the BSE Sensex.
The government would modify a contentious provision of the Income Tax Act to make it more transparent and move amendments in this regard in the winter session of Parliament, Finance Minister Arun Jaitley said. “ I have accepted the A P Shah panel report submitted on Aug 25, 2015 … It said MAT would not be leviable on FIIs … a necessary amendment in provisions in section 115 JB of the I- T Act would be required and hopefully, we will bring that out in the winter session, or whenever the next Parliament session is held,” he said.
“We will issue instructions to field formations till the I- T Act is amended.The amended I- T Act will be more transparent,” Jaitley added.
A report by the Shah panel had suggested the government move towards certainty and predictability in the tax regime.
“FIIs are mostly open- ended investment funds, which permit their investors to enter and exit daily, based on the NAV ( net asset value) of the fund, unanticipated tax liability (or the fear thereof) relating to previous years, which would have to be borne by the current investors, maybe a sufficient trigger for the investors to exit,” it said.
In the 19 years since MAT was introduced (1996), it had never been levied on FIIs and foreign portfolio investors (FPIs). Instead, these entities were governed by the beneficial tax scheme under section 115AD.
Business Standard, New Delhi, 2nd Sept. 2015
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