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18.5% MAT on SEZs to continue despite opposition Mumbai / Bangalore
The minimum alternate tax (MAT) of 18.5% imposed on Special Economic Zones (SEZs) during last year’s Budget is all set to continue even this year, despite the pressure by IT body Nasscom, industry sources have said. The tax has brought down investments in SEZs to a trickle over the last one year, but the finance ministry is believed to be keen on continuing with the taxation to ensure an even sharing of corporate tax liabilities. In the last two months, Nasscom had been trying to convince the ministry about abolishing the MAT burden, but sources with direct knowledge of the matter told FE that the trade association has not been able to make any inroads on the matter. Both the developers as well as units in the tax-free zones were earlier exempted from MAT under Section 115 of the Income Tax Act. Infosys chief financial officer V Balakrishnan had told FE on Monday that the tax will continue unabated even this year, though Nasscom is still hopeful. Nasscom president Som Mittal, who had on record said that removal of MAT on SEZs and simplification of tax strategies are on top of his budget wishlist, said that imposition of MAT on SEZs is like going back on government policies. “Many companies have made huge investments and suddenly you see MAT being introduced. For us, it creates major cash flow issues.” MAT was introduced in 1987 to bring under the tax net those companies that paid very little or no tax after taking advantage of the exemptions under Income Tax Act. A couple of years ago, MAT had levied at 15%, before being raised to 18%, and then eventually to 18.5% in last year’s budget. Raising MAT had been tough for small and medium IT players. In last one year, this has been a deterrent for companies in tier-II and III cities, which had always banked on SEZs for expansion. IT companies have been migrating to SEZs as tax breaks under the Software Technology Parks of India (STPI) scheme came to an end last year. Keshav R Murugesh, Group CEO of BPO firm WNS said the government instead must focus the industry towards creating infrastructure inside special economic zone assets and taking the model deeper into tier-II and III locations. [Source: The Financial Express]
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