No MAT on FIIs from April, old cases to continue

The finance ministry on Wednesday said earlier cases of imposing minimum alternate tax (MAT) on foreign institutional investors would continue, even as they will be exempted from 2015-16 financial year (2016-17 assessment year) onwards.

The earlier ones arose because an FII went to the Authority on Advance Rulings (AAR), which gave an adverse verdict.

“There are reports that some notices have been issued. These are old notices,” Revenue Secretary Shaktikanta Das said at the Federation of Indian Chambers of Commerce and Industry.

The AAR had said MAT was leviable on FIIs. “So, department officials are required to act upon it and several notices have been issued,” said Das.

Around 90 foreign funds have been asked to pay MAT by March 31. However, MAT would not be levied from the next financial year, starting April 1.

“Considering the difficulties faced and concerns that have been expressed, the finance minister has included this provision to exempt (FIIs) from MAT,” Das said. “The government has responded to a particular problem encountered by a particular class of tax payers and that problem has been resolved for months and years to come.”

In the Budget speech, Finance Minister Arun Jaitley had said, “In order to rationalise the MAT provisions for FIIs, profits corresponding to their income from capital gains on transactions in securities which are liable to tax at a lower rate shall not be subject to MAT.”

Indian industry representatives also pressed for either reducing MAT, leviable at over 20 per cent, on companies or past losses be allowed a carry forward. To this, Das said no particular sector had been exempted from MAT since there were revenue considerations.

“From SEZs (Special Economic Zones) also, there was a huge demand. The government has not exempted any particular sector. Once you start the process of exemption, it becomes endless,” he said.

He noted MAT gave the exchequer Rs 37,000-38,000 crore in a year. “Ultimately, we have to balance the budget in line with the fiscal consolidation road map,” Das said.