IT industry upset with 20% MAT on SEZs
By Our Real Estate Bureau
August 31, 2010
The Indian IT
industry criticized the proposed imposition of a 20 per cent
Minimum Alternative Tax (MAT) on Special Economic Zones (SEZ) as
per the Direct Tax Code (DTC) Bill tabled in Parliament. All other
software units, which come out of the Software Technology Parks of
India (STPI) scheme next fiscal, would face a corporate tax rate of
30 per cent in April 2012 when the new code becomes applicable.
SEZ units currently do not pay tax at least for the first five
years of their operation. STPI units pay MAT of 18 per cent. In the
absence of the DTC, they would have faced a corporate tax rate of
33.22 per cent in April 2011.
Som Mittal, Nasscom President, said, “The proposed MAT for
SEZs was a “disappointment”, particularly in the
context of SMEs, and expressed hoped that it would be reconsidered.
It is a dampener for SMEs because it will be a cash-flow burden and
they may not find it worthwhile to move into an SEZ. We had
suggested also that there should be a provision of ‘virtual
SEZs' or SMEs should (continue) to get benefits similar to STPI but
(neither) has come through.”
The DTC coming into effect only from April 2012 gives time to
companies to plan their expansion.