Rationalization of MAT rates


The purpose behind introduction of MAT was to bring all zero tax companies within the tax net and to neutralise the impact of certain benefits/ incentives. The Finance Minister while introducing the Finance Act, 2015 announced to reduce the rates of  corporate tax from 30 per cent to 25 per cent in a phased manner. The Finance Minister further stated that the reduction of tax has to be necessarily accompanied by rationalisation and removal of various kinds of tax exemptions and incentives for corporate taxpayers.

The Finance Act, 2016 has also amended the relevant provisions of the Act that would ensure the phasing out of deductions and incentives available to companies to realign with the governments’ decision of reducing the corporate tax rates as mentioned above. Similar phasing out has been done by the Finance Act, 2017.


Since government has already started implementing phase out of exemptions and incentives, it is suggested that the levy of MAT should be withdrawn. Without prejudice to above, since the exemptions and incentives being phased out for corporate taxpayers, it would be necessary that the MAT provisions, which were introduced to bring in the tax net the corporate taxpayers which were otherwise not being taxed, should also be streamlined. 

It is suggested that with the phasing out of exemptions and incentives and reduction of corporate tax rates, the burden of MAT should also be gradually reduced from the current levels of 18.5 per cent to a rate which will match with phasing out of tax  exemptions and incentives.

Source-  ICAI Pre- Budget Memorandum–2018 (Direct Taxes and International Tax)

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June 2021