The government on Monday proposed to levy Minimum Alternate Tax (MAT) of 18.5 per cent on the book profits of Special Economic Zone developers and units, which was termed as a 'setback' by the players.
Insurance firms and non-banking finance companies are heaving a sigh of relief as the revised draft of the Direct Taxes Code has suggested that book profits rather than gross assets be used to calculate the minimum alternate tax, or MAT, for both groups.
Tax rates would be made known only in the proposed Act, a bill for which will be introduced in Parliament in the coming monsoon session.
Redrafting the Direct Taxes Code is proving to be an uphill task for the finance ministry, bombarded with comments from various stakeholders. The Central Board of Direct Taxes has received about 10,000 suggestions on the code, which seeks to replace the Income Tax Act of 1961.
Recently, Finance Minister Pranab Mukherjee had assured industry that the government was open to re-examining proposals in seven key areas.
The government will introduce the Direct Taxes Code by April 2011 after examining thoroughly seven proposals such as taxing savings schemes and clamping the Minimum Alternate Tax (MAT) on gross assets that have not found favour with the industry, trade and people at large.
Ninety-nine companies, which also include some unlisted ones, have more than Rs 100 crore each of minimum alternate tax credit on their books, cumulatively adding up to Rs 75,000 crore. By utilising MAT credit, many companies will be able to bring down their effective tax cost.
The levy of clean energy cess on domestic and imported coal at Rs 50 per tonne can affect select players with captive thermal power plant, and also soda ash producers.
The hike in excise duties will be largely passed on to customers.
The excise duty was increased on bulk drugs and intermediates from 8% to 10%, but fortunately the excise duty on formulations remains at 4%.
The software industry on Friday hit out at the government for increasing the minimum alternate tax and for ignoring the industry's plea for extending STPI scheme which would have continued to give tax breaks.
Pranab Mukherjee touched upon the problems and the initiatives needed to spur Indian Economy, but there is hardly anything on table for the industry to cheer about.
The government is likely to ease the incidence of minimum alternate tax, or MAT, on infrastructure companies.
Taxpayers are not likely to get as much relief as was proposed in the discussion paper on the Direct Taxes Code last year, with the Finance Ministry saying that the tax slabs may be narrowed down in the bill, slated to be tabled in the monsoon session of Parliament.
The government's proposal to compute minimum alternate tax on profits, and not on assets as planned originally in the direct taxes code, has put a smile on the face of industry.
Expects exemption of oil and gas profits from minimum alternate tax and all cess in the nature of excise duty are to be subsumed in GST.
The levy of service tax for transport of goods by rail, transport of cargo, goods through inland water including national waterways will hike the transport cost.
The Union Budget 2009-10 has proposed to extend the terminal date for starting the power generation by cogen plant by one more year.
The dyestuff industry is at a threshold of momentous change.
Unveiling the Budget for 2009-10, Finance Minister Pranab Mukherjee said, "MAT was introduced to address inequity in taxation of corporate taxpayers. In the quest for greater equity, I propose to increase the rate of MAT to 15 per cent of book profit from the present rate of 10 per cent."
India Inc on Monday welcomed the focus on reviving economic growth to nine per cent as also the indications for bold tax reforms, but expressed regret that the Minimum Alternate Tax was raised and Security Transaction Tax was let to continue.
Finance Minister Pranab Mukherjee has announced that Fringe Benefit Tax (FBT) has been abolished. The commodity transaction tax (CTT) has also been abolished. The Goods and Services Tax (GST) will come into effect from April 01, 2010, Mukherjee said.
The proposal to levy a minimum tax based on assets undoes most of the good that the code seeks to do and will discourage capital-intensive industries.
The higher MAT and confusion over whether its gas is eligible for a tax holiday have hurt the stock.
Union budget provides no major fillip to the ailing sector.
The increase in liability towards MAT will be matched by an incremental deferred tax credit.
The hike in MAT will not be earnings dilutive but will only be cash flow dilutive.
Some chlor alkali producers using naphtha as feedstock for captive power plant will benefit from cut in the excise duty on naphtha from 16% to 14%.
With the introduction of CTT, commodity players raise their doubts about the fledgling futures market.
The eGoM, headed by External Affairs Minister Pranab Mukherjee, is likely to take up issues including demand from developers to revise the 5,000 hectare land ceiling for one SEZ.
Highlights of the announcements made by Finance Minister Nirmala Sitharaman on the reduction in corporate tax and other fiscal relief measures for the economy to promote growth and investment.
The robust revenue collection reinforces hope of a good economic performance in the third quarter of financial year 2020-21 after the surprising pickup seen in Q2.
The slowdown in the US economy along with domestic factors like service tax on leased and rented premises and imposition of minimum alternate tax may impact revenues and earning growth rates of all major IT companies of India.
The US slowdown, service tax on leased and rented premises and imposition of minimum alternate tax are expected to take a toll on the revenue and earnings growth rates of all frontline IT companies in 2007-08.
The appreciation of the rupee, the dividend distribution tax and the hangover of the minimum alternate tax on information technology companies under the Software Technology Parks of India scheme have pulled the prices of IT stocks down.
'Depreciation should be claimed on original book value, not after revaluation'.
Industry body Assocham has sought elimination of Minimum Alternate Tax saying that it was coming in the way of growth of companies and inflow of foreign capital.
Purchase of items in excess of two-and-half times the income filed under annual information return (AIR) may become one of the criteria for selecting cases for scrutiny assessment by the income tax department.
MAT has damaged investor confidence
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