The Union Budget has increased the Minimum Alternative Tax or the MAT burden on the IT sector. Now IT companies are to pay 11.22 per cent of their adjusted book profits.
But experts believe Infosys, TCS and Satyam may not see a major impact of this announcement as they are already paying 12 per cent effective tax.
Giving his views on the same, V Balakrishnan, CFO of Infosys says this will impact all companies, while some of the companies can get a set off too. "Infosys' net margins will be impacted by 1.5 per cent due to MAT," he says.
But he explains that it might different for companies that pay taxes outside India too. "If you take into account the double taxation benefit, it would be 1.5 per cent, otherwise it would be 2.5 per cent. But it depends from company to company," he says.
Nilesh Shah of Kotak AMC too gives his views, "1.5 per cent on margins, I think is a lot."
He explains, "If my current tax rate 17 per cent, then instead of 17 per cent that tax rate could increase to 18.5 per cent. I think Infosys meant 1.5 per cent on the PBT and not margins, because if it is that, I think it is still okay, but if it is 1.5 per cent margin hit, then I think that is a lot."
Ashok Wadhwa of Ambit RSM too voices his opinion on this, "Section 10A and 10B being included in MAT is levying backdoor tax on IT companies. I am not in favour or against the fact that IT companies pay tax, but maybe IT companies should pay tax if they are making so much profit," he says.
He further adds, "I am against the concept of to some extent stepping back on what was given as a commitment and this is the point that I was making yesterday. If we don't have regulation that can be consistent and can be predicted as remaining intact, how are you going to encourage industries to make serious investments based on that legislations? That is not good news at all."For more such reports, log on to www.moneycontrol.com
