The forthcoming Budget is unlikely to reduce the minimum alternate tax (MAT), which is the minimum tax that companies pay on book profit, according to leading tax experts.
"It is unlikely that any major structural changes will be brought in the MAT provisions this year's Budget," said KPMG executive director Vikas Vasal, when asked whether there is any possibility of the Government reducing the MAT rate as is being advocated by the industry.
The MAT, which was raised from 10 per cent to 15 per cent last year, is imposed on profitable companies, which do not fall under the corporate tax net because of various exemptions. However, the proposed direct taxes code (DTC) suggests only a 2-per cent MAT, but that on the gross assets and not on book profit.
Commenting on the issue, leading law firm Titus & Co senior partner Diljeet Titus opined that "as the Government has promised to implement the DTC from 2011-12, that would be the right time to take a view on the incidence as well as the methodology of computing MAT."
Expressing similar views, another leading law firm Amarchand and Mangaldas partner Aseem Chawla said, "it is unlikely that the Government would agree to the demands for tax cut by reducing the basic rate of MAT as the same as been substituted only in the previous Budget".
However, all the leading industry chambers such as the Ficci, CII and PHDCCI are strongly advocating a reduction in MAT to at least 10 per cent saying high rate is hitting internal resource generation of companies.