While the government’s commitment to introducing the Goods and Services Tax at the earliest has meant there have been no major changes to indirect tax, other tax proposals like the carry-forward of Minimum Alternate Tax credit for 15 years is a welcome move, according to experts.
“The FM in his speech has shown government’s determination to introduce the GST at the earliest in 2017 and therefore, no major changes have been propose in the existing indirect taxes,” Nihal Kothari, Executive Director at Khaitan & Co said. “However, the inverted rate structures in customs and excise duties has been eliminated. As a boost to digitisation of economy, government has announced exemption from excise and customs duty on manufacture or import of equipment used in such processes. In view of hardening of crisis of petroleum the customs duty on LNG is reduced from 5% to 2.5%.”
While the industry has been calling for the phasing out of MAT, the government has decided that the time is not favourable to do this.
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“With profit linked incentives being phased out, there was a requirement to phase out minimum alternate tax,” Abhishek Goenka , Partner – Tax & Regulatory Services at PwC said. “It appears that MAT may continue for another few years but it has now been proposed to increase the carry forward of MAT credit to 15 years (instead of the existing 10 years). While the expectation was to also reduce the MAT rate from 18.5%, the extended carry forward of MAT credit is a welcome move as it will enable companies’ to off-set their future tax liabilities once the profit linked investments are phased out.”