Budget may lower MAT for MSMEs, SEZs and infra sector

news
02 February 2015

The finance ministry is mulling a differentiated minimum alternate tax (MAT) format for different industry segments in a move aimed at giving a push to its 'Make in India' programme. This, including other measures, is expected to be spelt out in the coming union budget.

Reports citing finance ministry insiders said under the differential minimum alternate tax (MAT) regime, there will be a lower rate of tax, particularly for the micro, small and medium enterprises (MSMEs), special economic zones (SEZs) and those in the infrastructure sector.

The differential MAT that could be introduced in the budget for SMEs and SEZs is likely to be in the range of 5 to 10 per cent against the ruling rate of 18.5 to 20 per cent and surcharge and cess there on.

Alternatively, the government is considering deduction on investment allowance for MAT computation purposes.

MAT was introduced to ensure no profit-earning company used exemptions and incentives to avoid tax liability

Reports said policy makers are now looking at various alternatives, but nothing has been finalised as yet. MSMEs currently account for eight per cent to the country's gross domestic product and a lower tax rate could give a big impetus to Indian manufacturers.

The budget is likely to follow a selective approach and budget makers are now looking at key sectors that are crucial to development.

The commerce ministry is reported to have made a strong pitch for changes in tax rates as a way of promoting domestic manufacturing in various sectors.

The government had introduced MAT in April 2012 to ensure that no profit-earning company uses exemptions and incentives to avoid tax liability. This had invited severe protest from SEZ developers and units within the so-called tax-free zones.

There is provision to claim MAT credit for 10 years as in the case of SEZ tax holidays, but the time limit cannot be extended.





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