Skip to main content

MAT phase-out may kickoff in Budget

The Union Budget is expected to provide relief to companies which come under them inimumal ternate tax (MAT). Sources who attended a presentation made by the finance ministry last month said the current tax framework has made MAT aredundant levy.
“While the government has already promised to lower the corporation tax rate further,it has also started work on ending tax rebates and tax holidays for companies.If foreign institutions canbe exempt from such a tax,even domestic companies should get a similar benefit,”the sources said.
There ducing gap between corporation tax and MAT is one of them a in reasons for the government to consider such a step. While the current MAT rate is 18.5 percent, corporation taxes have come down to 29 percent from 35 percent earlier.And this gap will narrow further as the government has promised to bring the tax down to 25percent by 2019.
Punit Shah, partner, Dhruva Advisors,said according to the road map laid down by the government,the corporation tax rates may be reduced along with phase-out of exemptions and incentives.“The logical corollary would be that MAT would be come redundant. It should be possible to reduce MAT rate immediately and phase it out completely over a period of three to four years,”he said.
There are other arguments favouring doing away with MAT.“Taxes like MAT The other proposals under consider a companies,at present.
In 2014, this issue had come under focus, when the tax authorities sent notices to various foreign portfolio investors (FPIs) demanding MAT on the capital gains they had made from Indian operations. Subsequently, the government had withdrawn the levy of MAT for FPIs and foreign companies who don’t have any permanent establishment in India.
MAT was introduced by the government to check practices that allowed companies with substantial income to escape the tax net. This was possible on account of various exclusions like dividend payouts and credits availed through tax incentive schemes. Although MAT was first introduced in 1987, it was subsequently scrapped. However, the provision was soon reintroduced in 1997. During the time, the rate for MAT was fixed at 12.5 per cent of the total book profit.
Business Standard New Delhi,12th January 2016


Popular posts from this blog

RBI rushes in to prop up falling rupee

RBI rushes in to prop up falling rupee India’s central bank reportedly intervened in the currency markets on Monday to prevent a further slide in the local unit, which breached the 67 mark to a dollar for the first time in 15 months amid a widening trade gap and runaway import bills fuelled by high crude-oil prices. Some state-owned banks were seen selling dollars aggressively, interventions that market dealers attributed to the central bank’s strategy to stem the decline of the Indian rupee against the US currency. The rupee is the worst performing among a dozen Asian monetary units in the past three months. It lost 4.25 per cent to the dollar during the period, show data from Bloomberg. On Monday, the Reserve Bank of India (RBI) is said to have sold about Rs 800 million collectively on the spot and exchange traded futures markets, dealers said. An email sent to RBI remained unanswered until the publication of this report. The currency market has seen such a strong central bank interven…

GST Refund of Rs 20,000 Cr Pending: Exporters’ Body

GST Refund of Rs  20,000 Cr Pending: Exporters’ Body Refund of over Rs 20,000 crore on account of Goods and Services Tax (GST) is pending with the government with more than half the amount stuck as input tax credit, Federation of Indian Export Organisations said on Tuesday. While claims over Rs7,000 crore were cleared in March, the amount was Rs 1,000 crore in April.However, after exporters’ request, the GST council and tax department are organizing a second phase of Special Refund Fortnight starting May 31, which will enable exporters to draw their refunds at a speedy pace. Many exporters have been unable to file the refund of input tax credit due to technical glitches, exports and claim happened in different months. The major challenge lies on ITC refund especially because the process is partly electronic and partly manual which is cumbersome and add to the transaction cost, the exporters’ body said. On IGST, refunds are getting delayed due to airline and shipping companies not submitt…

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…