The levy of minimum alternative tax (MAT) on special economic zones in the Union Budget has come in for widespread criticism from the industry circles, but a high-ranking official - the Development Commissioner of the Visakhapatnam Special Economic Zone (VSEZ), Mr. M.S. Rao - is also critical of the Budget proposal. He feels it is “contradictory.”
Mr Rao expressed the opinion at an interactive session organised by the local chapter of the Confederation of Indian Industry (CII) here on Friday. He said the Union Commerce Ministry was not viewing the MAT proposal favourably and had taken it up with the Union Finance Ministry. “I am sure the Union Finance Ministry will address the issue. It appears that the levy of MAT on SEZs is a prelude to the introduction of the Direct Taxes Code but in the DTC bill it was clearly mentioned that introduction of MAT on SEZs should be linked with investment-linked incentives. Without such incentives, I do not see how MAT can be levied. It is a fundamental contradiction. You cannot give tax exemption to SEZs on the one hand and take it away through MAT. Further, these exemptions are given with a specific purpose. As other countries are incentivising exports, our Government is also offering these exemptions and incentive to our units in SEZs. Therefore, the industry is concerned. The Union Commerce Ministry is taking up the issue,” he explained.
However, he felt, there was no justification over the hue and cry being raised over the levy of MAT on EOUs and STPIs. “It was well known to these units that the tax exemption would be limited to a period of ten years from 1999 and that period had expired. Therefore, they should be prepared. The case of SEZs is different,” he said.
Zero-tax vs tax-exempted
Earlier, Capt. Sriram Ravichander, the Chairman of the Vizag zone of CII, expressed similar views on the issue. He said the Union Government seemed to have made no distinction between zero-tax companies and tax-exempted companies. “You can impose MAT on zero-tax companies. It makes sense. But for units and companies which have been exempted from tax for a specific purpose and for a specific period, you cannot suddenly levy tax. The investment in SEZs is linked to the exemptions. It will be badly affected. I hope the Union Government will reconsider the decision,” he said.
Mr Chandrahas Mathur, the Chief Commissioner of Customs, Excise and Service Tax, Vizag, explained the Budget proposals at length. He said a conscious, concerted effort had been made by the Finance Minister to bring down litigation relating to tax matters. It was a very welcome move, he added. The Finance Minister also had given the tax-collecting authorities more teeth with regard to collection of service tax. It was also necessary, he felt.
Mr Lucas Peter, Commissioner of Income Tax, Mr Tapan Gupta, Associate Director KPMG, and Mr N. Mohan, Associate Director of KPMG, also spoke. Mr R.V.S Raju, vice-chairman of the CII, Vizag zone, proposed a vote of thanks.