New Delhi : The government is considering clarificatory amendments to the rules on minimum alternate tax (MAT) for the benefit of foreign investors who are faced with retrospective capital tax gains demands worth Rs.40,000 crore.
“Clarificatory amendments to MAT rules are under consideration of the government,” Minister of State for Finance Jayant Sinha told reporters here on Thursday on the sidelines of a conference on climate change.
In a meeting with foreign institutional investors (FIIs) here on Wednesday, Sinha asked them to wait for the court verdict. The matter has gone to the apex court and its decision is awaited.
However, the government has clarified that such demands would not apply to entities from jurisdictions like Singapore and Mauritius, which have Double Taxation Avoidance Agreements (DTAAs) with India.
On Tuesday, a senior finance ministry official said the government will not yield to the demand of FIIs to withdraw tax notices issued to them.
Finance Minister Arun Jaitley in his first full budget speech on February 28 said that capital gains made by foreign investors from the current fiscal would be exempted from minimum alternative tax (MAT), but the exemption does not apply retrospectively.
Many foreign investors have been concerned about receiving notices requesting their MAT calculations for the financial year 2011-2012. Jaitley said in Washington last week that these companies had asked for a waiver on the ground it was an unfair tax, but they lost the case in courts.
“So, for future, I have abolished it (minimum alternate tax on capital gains) from April 1, 2015,” he said. “But their expectation that having lost the case, the state must now intervene, that looks a little difficult from my point of view.”
The finance minister, however, said such funds had the option to take their appeal to the courts.