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#UnionBudget2016: Industry demands relaxation of MAT on SEZs

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In order to boost the commercial sector and give fillip to India’s exports, industry players are expecting Finance Minister to relax the Minimum Alternative Tax levied on the SEZ units in the upcoming budget.

Introduced in 2007, the Minimum Alternative Tax (MAT) is a tax levied under India’s Income Tax Act of 1961 that scrutinises companies that show profits on their books and declare dividends, but pay minimal or no tax. The Finance Act, 2011, however, broadened the scope of MAT by bringing Special Economic Zone (SEZ) units under its ambit. This significantly diluted the benefits offered under the popular SEZ Scheme. Since then, the SEZs have lost their sheen and the number of proposals for setting up SEZs have progressively fallen. At the same time, applications for de-notification of SEZs have gone up.

The current rate of MAT of 18.5 per cent is quite high and has adversely impacted the cash flow of companies who otherwise have low taxable income or have incurred tax losses. Hence, the industry is demanding that the government give a serious re-look at the tax regime around SEZs, which have the potential to act as a catalyst to attract foreign exchange, investments and generate employment.

Here is what the industry experts had to say:

Minimum Alternative Tax

Minimum Alternative Tax-2

Minimum Alternative Tax-1

At a time when India is putting its taxation system in order and trying to close existing loopholes, the removal of the Minimum Alternative Tax can significantly help in ease-of-doing business in the country.

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