FM statement in Rajya Sabha on MAT in regard to FIIs on 7th May-15

A matter which has attracted considerable debate in the public space in recent weeks is thelevy of Minimum Alternate Tax (MAT) on Foreign Institutional Investors (FIIs). The difficultiesexperienced by FIIs in this regard were brought to the notice of the Government when we werepreparing the Budget for 2015-16. Considering their difficulty, the Finance Bill 2015-16 hasprovided exemption from MAT to the FIIs. Naturally, when an exemption is given, it takesprospective effect. In view of a ruling given by the Authority for Advance Rulings in 2012, it wasnot possible to provide retrospective exemption for the prior period. Perhaps, this matter shouldhave been addressed in 2012 itself and resolved in one way or the other. The affected party hadsubsequently gone to the Supreme Court and the matter is pending in the Apex Court. Thus, it maybe seen that as soon as the problem was brought to our notice, we have resolved the issue withimmediate effect.

Recently, the affected party moved the Supreme Court for early hearing. On behalf of theGovernment, it was conveyed to the Supreme Court that Government has no objection to earlyhearing as we are also keen on a final settlement of this issue for the prior period by the SupremeCourt. It is expected that the Supreme Court would fix an early date for hearing this case.

In the meantime, I have received a number of representations on this whole issue. We have,therefore, decided to refer this matter as well as a few other tax issues which are essentially legacyissues to a Committee to be headed by Justice A.P. Shah, Chairman of the Law Commission. TheCommittee will be requested to give its recommendation on the specific issue of MAT on FIIsexpeditiously. The Government will consider the recommendations of the Committee and take anappropriate decision as early as possible.

Let me reiterate once again that in matters of taxation, the Government is fully committed tothe principles of certainty of taxation, avoidance of retrospectivity and providing an enablingenvironment to business and investment, both domestic and foreign. We will ensure that theseprinciples are adhered to in letter and spirit.

Author: Himanshi

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