No MAT credit for companies that opt for lower tax regime

NEW DELHI: Domestic companies opting for the recently announced lower tax regime of 22% will not be able to bring forward the loss on account of additional depreciation or avail accumulated Minimum Alternate Tax (MAT) credit, the Central Board of Direct Taxes said on Wednesday. The government on September 20 reduced the corporate tax rate for domestic manufacturing companies from 30% to 22% and for new manufacturing companies from 25% to 15% to help boost the economy. Such companies will also not be required to pay MAT, that brings companies that pay no tax into the tax net.

Companies that already brought forward loss on account of additional depreciation can opt for lower tax regime of 22% later as there is no deadline for exercising this option, it said. The circular justified denial of MAT credit because there is no provision of MAT under the new tax regime.

“The circular clarifies an important aspect regarding the decision to switch from the existing regime to the new regime. The issue was whether at the time of the switch, a one-time write off of MAT credit would be triggered or not. The circular now confirms that it will. This could be a huge cost to some companies who will now perhaps consider continuing under the old regime for the time being. This was perhaps done to minimize the costs to the exchequer for the transition,” Rohinton Sidhwa, partner, Deloitte India said.