As finance minister Nirmala Sitharaman gets ready to present her first Union Budget on July 5, Indian industry is hoping to see some tweaks in the minimum alternate tax (MAT) and alternate minimum tax (AMT) regime in the Budget 2019-20 announcements. In some cases, the industry and business houses say the MAT rate is too high; in other cases, they find the application of the rule by tax authorities troublesome.
It is not the first time the industry has been complaining about MAT. The government has always found it difficult to dilute the provisions of MAT as it has been a way to expand India's direct tax base and also fetch some additional revenues. It is estimated that in 2017-18, the government fetched Rs 48,927 crore as additional revenues from MAT collections.
Here are some of recommendations given by the apex industry chambers FICCI and CII:
FICCI on MAT
- The MAT should be gradually reduced from the current levels of 18.5 per cent to a rate, which will be commensurate with the phasing out of tax exemptions and incentives
- Exclude waiver of loan and interest from MAT as it will provide an additional fillip to entities to approach the Insolvency and Bankruptcy Board and will go a long way in achieving the objects of IBC and in reviving the distressed sector
- MAT on SEZ developers and units should be abolished
- The MAT/AMT credit should be allowed to be carried forward and set-off without any time limit
- Dividend received from foreign company should be exempt from MAT just like domestic dividend is exempt from MAT
- MAT should be abolished for a unit located in an IFSC to compete with tax breaks offered by IFSCs globally; for example Dubai (0%), Malaysia (3%)
- The benefit of investment-linked deductions is getting diluted as MAT/AMT at 18.5 per cent applies on book profit. Therefore, these deductions should also be allowed while computing the book profit/adjusted total income under the provisions of Section 115JB/Section 115JC of the Act respectively.
- In computing the adjusted total income for AMT, investment-linked deductions on capital expenditure for specified business (net of depreciation) should not be added back under Section 115JC of the Act.
- Set-off of MAT credit should be allowed in full (including applicable surcharge and cess paid on MAT)
CII on MAT
- CII specified some identical thoughts on MAT in its pre-budget recommendations to the government:
- MAT rate should be consequentially reduced in line with the rate under the regular provisions of the Act.
- MAT credit should be allowed to be carried forward indefinitely to avoid any lapse of MAT credit
- Just like domestic dividend is exempt from MAT, foreign dividend should also be exempt from MAT
- While calculating MAT, the entire book loss brought forward (including deprecation) should be allowed to be set off against the book profit
- The benefit of non-levy of interest under section 234C should be extended to capital gains included under MAT profits
Will Sitharaman relent? You will have to wait for the Budget day for an answer.