Budget 2013: IT seeks minimum alternate tax reduction to 5%

Hyderabad: The IT and IT-enabled services industry here has sought the reduction in minimum alternate tax (MAT) to 5 percent in the Budget 2013-14 for all IT companies operating in SEZs. The Finance Minister is slated to announce on Thursday the budget proposals for the next fiscal. “With the introduction of MAT for SEZ units, it has become very difficult for the IT companies in India (specifically for SME) sector to operate competitively and in a profitable manner,” ITsAP (the IT and ITES Industry Association of AP) said in a statement. [caption id=“attachment_638541” align=“alignleft” width=“380”] companies attributed exemption from tax as the key reason for investment in SEZs, which stood nullified with the imposition of the MAT. Reuters[/caption] “This has reduced the employment generation rate and further FDI investment in India. Hence the MAT should be rolled back or decreased to 5 percent,” it said. Under the present IT laws, business losses can be forwarded only for a minimum of 10 years and the same should be allowed to carry forward without any limitation. In the current economic downturn globally, recouping the losses in 10 years may not be possible and many countries are allowing losses without any limitation to period, the IT body requested. ITsAP also requested the FM to give an opportunity to set -off the taxes payable against refund due to the assessee which will increase the liquidity and save time in following up for the refunds. On Service Tax issues, the ITsAP said all export companies in IT/ITES are entitled for refund paid on the input services. “However, the same is not a reality as of today barring a very few cases. A series of meetings with Nasscom and other agencies with the Central Excise and Service Tax officers is not improving the refund process. Further, many small companies are not applying for the refund considering the hassles being created in the chain of refund claim,” the industry body said. BVR Mohan Reddy, Founder and Chairman of Infotech Enterprises Ltd, said for the software industry, withdrawing the MAT on SEZs, initiating a new SEZ policy to further improve IT exports, implementing a policy for R&D in software industry and promoting Tier II/III towns for inclusive growth will help accelerate growth in the software industry (IT Industry). As SME sector is the backbone for the industry and employs 59 million people, it can be a growth driver for future. And hence a special package for the SME sector will help sustainable growth, Reddy said. The tax on SEZ was introduced in the Union Budget 2011-12. The SEZ players said the benefits offered in the SEZ Act 2005, provided a wide range of incentives to investors in SEZs including exemption from MAT and 100 per cent income tax exemption on export income. According to a recent survey by research firm Ipsos, companies attributed exemption from tax as the key reason for investment in SEZs, which stood nullified with the imposition of the MAT. PTI