"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.
"As for the minimum alternate tax (MAT), we believe that it has been adversely affecting the internal resource generation of companies and coming in the way of their expansion and diversification plans," said Ficci president Harsh Pati Singhania said.
The existing 15 per cent MAT, he added, "is certainly on the higher side and needs a relook...companies should be allowed to set off entire past book losses, including unabsorbed depreciation before they are subjected to MAT."
CII director general Chandrajit Banerjee also echoed similar saying, "corporate India is strongly opposed to the imposition on MAT on gross assets (as proposed by the DTC). We have expressed our concern to the to the Finance Minister. He has assured us to reconsider the given clause."
Responding to queries on MAT, Ernst & Young India tax market leader Sudhir Kapadia said, "key recommendations of the direct taxes code are still under active discussion and it will be premature to introduce these as part of the Budget."
In the 2011 Budget, Finance Minister Pranab Mukherjee is slated to take steps to reduce fiscal deficit which is nearing unsustainable level, mainly on account of the stimulus given to the industry to combat the impact of global financial crisis.=