MAT provisions a key negative
The tax code proposes a radical change in the MAT provisions. Under the new system, MAT will be paid at a specified percentage of Gross assets of a company (broadly equates to capital employed, although it is unclear whether Net or Gross Current Assets will be considered for computation). The specified percentage is 0.25% for banking companies and 2% for all other companies. Although intended to widen the tax base by reducing tax evasion, the new MAT proposals appear onerous on several counts:
- Companies suffering genuine losses or sub-normal RoCE due to initial gestation period or cyclical downturn would also have to pay MAT at 2% of gross assets.
- Moreover, MAT credit will not be available, making the provisions all the more onerous.