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Last updated: 29 Apr, 2015  

Tax.9.Thmb.jpg MAT row: Lack of policy clarity proves fatal

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Bikky Khosla | 28 Apr, 2015
It seems the Centre has failed to pacify the foreign institutional investors. Around two weeks ago, our Finance Minister said that the government would press ahead with Rs 40,000 crore tax demand on FIIs. "I can change the face of India's irrigation with that Rs 40,000 crore," he claimed. Earlier, the investors had approached a tribunal but the latter decided against them. "How would be I answerable to Parliament that after the case I just waived Rs 40,000 crore," the minister reacted to this. The tax shocker rattled the equity markets in no time.

After two consecutive weeks of losses, the Sensex has lost over 1800 points, wiping out its entire gains made in 2015. Nifty has slipped nearly 1 percent so far in the year 2015. During the period, the rupee has depreciated by 1.78 percent. It is true that some other factors like Q4 results and monsoon forecast are responsible for this downfall, but it is the pulling out of money by the FIIs - which own 23% of the market as on December 2014 - over fear of retrospective tax that has made the real damage.

Last Friday the Centre went into a crisis-defuse mode, saying that so far total tax demand of 602.83 crore has been raised . . . the exact demand can only be quantified after final orders. In other words, the figure of Rs 40,000 crore might be theoretical only, computed by estimating the demands from all FIIs for all the seven years since 2007-08, including treaty cases. In a similar move, the CBDT notified its officers to settle within a month all claims made under the double taxation treaties, but again the letter hardly helped the cause.

Is there anything wrong in tax authorities demanding tax dues from the FIIs? The importance of FIIs to the economy cannot be overemphasized, but right now I want to leave this question aside. What I am concerned about is the confusion over our tax policies. There is a clear lack of clarity at a conceptual level as to the application of MAT. The same was the case over GAAR a few years ago, and it was a lesson well-learnt that no amount of damage control can match no damage at all. We expect the "business-friendly" government to strain every nerve to make our tax policies transparent and predictable for investors.

I invite your opinions. 
 
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MAT row: Lack of policy clarity proves fatal
Subodh Nandan | Mon May 4 09:05:54 2015
Dear sir, I agree with you. We are common man and investing our hard earned money in stock market to get better return. However, we always suffer because of uncertainty in the stock market. The Govt is custodian of investors and is expected to act to safeguard interest of common man by taking timely action to prevent such issues affecting market sentiments.


tax collection enforcement
raghavan | Sat May 2 10:10:31 2015
As such delayed payments and collection difficulties faced by the SME is prevalent in India. But as the Government is is a frenzy of tax collection they are now penalizing the companies for delayed payment of duties and taxes. Is the government nonchalant about the existing bad payments/ collections scenario or in their mood of tax collection overdrive they are overlooking this. Overall this is going to have a very negative impact on the Indian SMEs more than half of which is running only on borrowed money even for their day to day operational expenses.


MAT
Dilip | Fri May 1 00:08:45 2015
The Indian lion has woke up. It is roaring and get anyone. Who was responsible for the 7 year sleep? Does anyone step up and say, buck stops here? In India even a bank clerk cannot cash a check without 7 approvals.


Lack of policy
Satish | Wed Apr 29 18:04:00 2015
As usual US$ TO INR currency fluctuation is hitting exporters and importers all the time. Everyone hoping for the best to come. Regards / Satish


MAT controversy
Ashok Kumar Puri | Wed Apr 29 16:08:53 2015
The Government is interested in claiming the MAT for infrastructure projects in irrigation but the FII do not want to loose out on their incomes. The government should offer the MAT as a interest free investment in infrastructure with a lock in period of 20 years after which the FII can repatriate the MAT amount. The government benefits by using the money interest free for 20 years. The case holds good for Income Tax for domiciles and businesses also. Our country does not offer any social security and if a person goes bankrupt he has not means for sustenance. Income Tax should be in the form of a Providend fund so that if a person looses his job he can draw on the fund for sustenance till he finds another job. So also with businesses the Income tax should be in the form of a liquidation fund so that lean period losses can draw on the liquidation fund till better times. The Government gets to use the money at low interest rates to develop the country and every person or business pays their security fund (Income tax) honestly. Does the Finance Ministry have the guts to take such steps. Black money will disappear. FII will invest readily and the country will prosper. VAT paid by common man should be set off in their Income Tax. This will give a boost to domestic appliances and furniture and real estate industry. Till today only interest paid on housing is deductible from Income tax. Is the FM listening or not?


Tax complications
Ashok Kumar Puri | Wed Apr 29 12:38:37 2015
Our Country is riddled with Tax complications. Why should there be so many Taxes? Our fundamental right to live and engage in a profession is taxed. Can the common man claim set off for Vat paid for household goods and services which boost cost of living. Even watching TV for news is taxed as entertainment tax. Banks and Insurance service which is essential for sustenance of a individual are also taxed. Can these taxes charged be set off against income tax. NO. So the common man and business community resort to tax evasion measures. Do beggars pay profession tax? I don't think so but the daily income of a beggar exceeds that of a hard working laborer. The whole system should be simplified. PAN number only for all income tax related matters including TAN matters. TIN number only for VAT,CST,Service Tax,Excise,PTRC,PERC and other numbers that a business has to register for to pay taxes or it has to pay a penalty. The Income Tax authorities take advantage of these multiple registration to harassment. Can the Profits of a previous year be set off against the loss of a subsequent year. No. But the loss of a financial year can be carried forward to the next year. Even if there is minimum profit which can be set off against previous year loss MAT is payable. So businesses keep showing loss to avoid MAT. As FII need to show ROI they are subjected to MAT. The Tax structure should be such that there is no double taxation and all taxes paid can be set off against VAT or Income Tax.


MAT ROW
Raj Bhatia | Wed Apr 29 05:16:13 2015
I do not know much of MAT Row. In my view thee is always a big gap between policy makers and policy implementers. Tax Deptt is Law up to themselves. Our's is a small professional company with a link with international professional company. The amount of harassment we face on the hands of Income Tax Deptt., we tend to doubt if PM Modi's policy of 'Make in India' will succeed.


Check the data before announcement
O.P.Khandelwal, Indore | Wed Apr 29 05:11:58 2015
This is not the first time, that the difference of amount is very high. Most of the times, when GOVT. announce some estimated figures, but at last, actual figures are very low. Recently it is happened in case of "BLACK MONEY", every day figures were changed. It create confusion in the general. So in future, Govt. has to check the data, before announcement. This is in interest of the GOVT., it is deface the value, not only in public , but also in foreign. Secondly why not Govt. has raised the tax demand & recover the same in time, for what Govt.,has waited for years & years.


Law made in hurry
Gadepalli Subrahmanyam | Wed Apr 29 04:45:19 2015
When a law or statute is made, it is done in a hurry, so that plenty of loopholes could be used subsequently. No law is free from defects, just as no valve is free from leaks. It is this defect that makes lawyers make a living. Clever lawyers, can make mincemeat of any law and twist it to suit their clients. Now FIIs have become wary of the Finance minister's remarks and the result is withdrawal from markets. Now the FM is forced to take up bridge building exercises. I know a classic case, when the revenue authorities gave certain concessions to put up a solar industry, and later some higher authorities withdrew them with the result that the firm was faced with a situation of just closing down the unit. When laws are made in a hurry, there would be lacunae. That is the reason why some time tested, archaic laws still rule the roost in our country. If the wisdom rests only with elected parliamentarians, and the ministers, that rule the country for a specified time, these are bound to occur and recur too !


MAT row
S. Chanda | Wed Apr 29 04:27:08 2015
The problem is that the existing Govt. chases factices over zealous reports and figures and then try to correct it by putting all the blame to the previous government. Nothing is wrong in demanding dues from FII's- what is wrong is that these are time barred and all such due should be raised within one year of tax returns. Why so late -- it is very frustrating for all. Govt. is looking at the rosy picture of how much they will collect little knowing that confidence in business doing in India is waning day by day. Where are the FII's funds? They just invest in shares and make their buck when the value goes up and then withdraw. This cycle goes on. The present Govt. should be pragmatic and each case should be heard and closed within the shortest of time, instead of dragging their feet. Why the concerned ministers not taking decisions and blaming babus of not taking decisions! Do they read the files -- are they aware of the cases -- they only look at the negatives and draw conclusions. Ridiculous state of affairs.


 
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