Auto sector happy over lower tax rate, MAT

The auto industry has largely welcomed the Direct Taxes Code (DTC), in the current form discussed in the Lok Sabha on Monday.
A lower effective Corporate Tax rate at 30 per cent, from the current 33 per cent, is seen as a welcome step, though the draft DTC had proposed an even lower 25 per cent corporate tax rate.

Also, the change in Minimum Alternative Tax (MAT) to 20 per cent of book profits, lower from the proposed 25 per cent, has found favour with the industry. This is because in its current form MAT with the addition of surcharge and cess, anyway adds up to 19.33 per cent.

The Maruti Suzuki Chief Financial Officer, Mr Ajay Seth, said there will be no major impact on the auto industry, as it will mostly be paying lower corporate taxes.

“Overall, the DTC is a welcome step. It is more simplified and has fewer exemptions. There's also the indirect advantage from individual tax rates, since more money in the hands of the public may translate into increased sales,” he said.

However, he added that clarity is needed on deductions provided for investments on R&D as proposed in the last Budget. “The Budget had allowed deductions of 200 per cent for investments on R&D, but the DTC mentions a 150-per-ent deduction. This has to be figured out.”

Industry analyst Ms Vaishali Jajoo of Angel Broking and Mr P. Balendran, Vice-President, Corporate Affairs, General Motors, said that the DTC in the current form is good for industry.
"If implemented in the current form, it will surely be beneficial. Lower corporate taxes and MAT on book profits are both welcome steps,” said Mr Balendran.