Levy of Minimum Alternate Tax
The spirit behind levy of MAT is that every person participating in the economy must contribute to the exchequer. As a result of various exemptions, deductions and other tax incentives in the corporate sector, the revenue forgone has been climbing up significantly. MAT is aimed at recouping a part of the loss in revenue collection on account of exemptions, deductions and other tax incentives in the corporate sector. MAT was introduced to address inequity in taxation of corporate tax payers and to promote inter-se equity among them.
There were representations received from various stakeholders on the issue of levy of MAT. In the wake of representations, the Government constituted Justice Shah Committee to look into the issue which submitted its report to the Government on 25.8.2015. Taking into account all relevant facts, it was decided by the Government that MAT shall not be applicable to a foreign company, if the foreign company does not have a permanent establishment under relevant Double Taxation Avoidance Agreement (DTAA) or a place of business in India. Accordingly, Finance Bill 2016 proposes to amend the law with retrospective effect from 1.4.2001 to give effect to the above decisions.
This was stated by Shri Jayant Sinha, Minister of State in the Ministry of Finance in written reply to a question in Lok Sabha today.