Justice AP Shah Committee on minimum alternate tax (MAT) has recommended to the finance ministry that the levy shouldn’t be imposed on Foreign Institutional Investors (FIIs) for the period preceding April 1, 2015.
As per the Finance Act, 2015 proposed in the union budget, the 20 percent MAT on capital gains made by FIIs is waived off from the financial year 2015-16. However, the issue of imposing MAT for past years till 2014-15 has become controversial. If this recommendation is accepted, it would mean a significant relief for FIIs facing several years of levies on capital gains made by them.
Background of the Committee:
The panel was set up to resolve the dispute between FIIs and the government after notices were sent to 68 FIIs by the Income Tax Department demanding Rs 602 crore as MAT dues. The notices were sent to these FIIs after the Authority for Advance Rulings (AAR) in 2012 had directed Castleton to pay MAT in India on its book profits when the company transferred shares from a Mauritius entity to one in Singapore. However, many FIIs challenging the demand in court and in the wake of this row the panel was established by the finance ministry and officials were told not to pursue MAT cases.
About the Committee:
The committee was composed of 3 members – Justice Ajit Prakash Shah (Chairman) who is currently heading the 20th law commission of India, Dr. Girish Ahuja and Dr. Ashok Lahiri.
Possible Impacts:
- Non-levy of MAT on FIIs prior to April 1 would be a welcome move to boost foreign investment.
- The Union Minister of State for Finance Jayant Sinha welcomed the recommendation and said further that this will be positive for the booming Indian market.