20 May 2008
YES STPI UNITS ARE LIABLE FOR MAT AS CAN BE SEEN IN DETAIL BELOW.
EXTENSION OF MINIMUM ALTERNATE TAX ('MAT') ON STP UNITS
Perceived as a major blow (and wrongly so, in our opinion), STP units availing of 100% tax exemption under Sections 10A/10B of the Income tax Act, will now be required to pay Minimum Alternate Tax @ 10% (for 2007-08) of their 'book profits', as prescribed. Before this proposed amendment, STP Units were allowed to deduct their profits arising from their export operations, from their book profits, for purposes of MAT under Section 115JB of the Income tax Act. In other words, export profits were exempt from the levy of MAT.
he Income tax Act clearly provides that the MAT paid by the STP Unit can be adjusted against its tax liability over the next five years. MAT paid for 2007-08 and 2008-09 can be adjusted against the tax liabilities for the future years (upto five years).
The effective MAT rate for STPs which are domestic companies would be 11.33%(basic rate of 10% + Surcharge@ 10% + Education Cess of 3%).
RECENTLY TAX EXEMPTIONS UNDER SEC 10 A/B WERE EXTENDED BY ONE YEAR BY THE GOVT BEYOND 31 -03-09. BOOK PROFITS FOR MAT PURPOSE ARE ARRIVED AT AFTER MAKING 13 ADJUSTMENTS TO NET PROFITS..PL SEE SEC 115JB FOR DETAILED CALCULATIONS. R.V.RAO
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