In its Pre-Budget Memorandum for 2015-16, submitted to the Ministry of Finance, the Confederation of Indian Industry (CII) has strongly recommended that Minimum Alternate Tax should be reduced to 10%.
“The imposition of Minimum Alternate Tax runs counter to benefits provided to companies investing in designated areas such as Special Economic Zones and the entire provision of MAT needs to be re-examined to incentivize investments,” stated Mr Chandrajit Banerjee, Director General, CII, in a press release.
MAT rates have more than doubled from 7.5 percent of book profits in 2007 to 18.5 percent today.
CII has submitted that investment allowance eligible for deduction should also be reduced while calculating MAT. The period for availability of MAT credit may be extended from 10 years to 15 years to enable developers to claim credit in long-gestation projects.
The deductions under Chapter VI-A of the Income Tax Act should be allowed even in computing MAT. Alternatively, MAT maybe made inapplicable to infrastructure projects. If not, infrastructure projects should at the very least be entitled to a much lower rate of MAT, said CII.
In particular, CII has stressed that MAT relief should be granted to developers and units in SEZs.
Section 115JAA of the Income Tax Act should be amended to provide that successors in case of amalgamation, demerger or any other form of reorganization should be eligible to claim benefit of MAT credit.
“Infrastructure spend is one of the key economic asks in the current situation. CII has pointed out that growth in gross capital formation, or investment, has been negative in four of the last six quarters,” said Mr Banerjee.
Projects such as roads, telecom, power and others, enjoy a deduction under Chapter VI-A of the Income Tax Act. Such projects typically incur tax losses in initial years of tax relief; however, they pay tax under MAT during the period of tax relief and therefore, do not enjoy a tax holiday as such.