Latest Expert Exchange Queries

GST Demo Service software link: https://ims.go2customer.com
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft info@binarysoft.com
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
 
 
 
 
Popular Search: VAT RATES :: ACCOUNTING STANDARD :: form 3cd :: empanelment :: cpt :: articles on VAT and GST in India :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: Central Excise rule to resale the machines to a new company :: TAX RATES - GOODS TAXABLE @ 4% :: TDS :: ACCOUNTING STANDARDS :: due date for vat payment :: VAT Audit :: list of goods taxed at 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT
 
 
« News Headlines »
 Notification regarding extension of last date w.r.t submission of closing stock by dealer.
 Integrated Goods and Services Tax (IGST) Rules, 2017 (As on 15.11.2017)
 Central Goods and Services Tax (CGST) Rules,2017 (As on 15.11.2017)
  101st Constitution Amendment Act, 2016
 Pr. Commissioner Of Income Tax-6 Vs. Mccain Foods India Pvt. Ltd.
 Section 10 of the Income-tax Act, 1961
 Income tax returns filing: No tax on gift received from relatives in form of cash
 Income tax returns (ITR): Here is why you need to pay higher tax on other incomes
 GST Update On Issuance Of Debit Notes And Credit Notes
 How Mutual Fund Investments Can Help Save Income Tax
 Income tax returns (ITR) filing: Why small service providers need to get this benefit

This MAT may cost IT cos up to $1 bn
March, 03rd 2007

The governments decision to extend minimum alternative tax (MAT) to IT services companies could result in companies shelling out $800 million to $1 billion.

Depending on the extent of offshore and onsite work, the tax implication could be an average of 2-4% for industry-wide revenues. This translates into a tax outgo of at least $800 million to $1 billion on account of MAT for the industry, says the CFO of one of Indias largest IT services companies. Rajiv Anand, associate director of PWC agrees that the implication of MAT for a single year could well be more than $800 million. We see MAT as a cash flow issue but not a lost case, he said.

Since the government allows tax payments on account of minimum alternative tax to be used to offset future tax liabilities (post sunset clause of 2009), it is unlikely to have a major bearing on the earnings of companies, says the chief financial officer of an IT services major.

A Morgan Stanley analysis notes that while minimum alternative tax would increase the effective tax rate by 4-5% for most companies, there will be no P&L impact as these can be recognised as deferred tax assets in the balance sheet. Since MAT payment can be carried forward to future years, companies can take credit against future tax liabilities that arise after March 2009. For Infosys, the net tax impact will be 1.5% of revenues, said Infosys chief financial officer V Balakrishnan.

Currently, the companies pay taxes in overseas geographies and therefore minimum alternative tax on onsite income would be completely offset by these tax payments. The companies pay no or little taxes on offshore income. MAT on such income can be offset partially by the taxes these companies pay on interest income and on profits obtained from clients in India. There will be a net tax liability, however, said the Morgan Stanley report.

As the government allows tax payments on account of minimum alternative tax to be used to offset future tax liabilities and since the current tax exemptions for IT companies end in FY2009, these IT companies should be able to transfer the current MAT amount to the balance sheet as deferred asset, resulting in zero impact to the P&L. There will be a small cash flow impact, however. Essentially, tax outflows post-2009 will get pulled forward.

Its just a cash flow issue. But companies feel deceived as the IT industry was declared tax free till 2009, Bharat Varadachari, tax partner at Ernst & Young, said. Indias largest software company TCS margins will be impacted by 1.6%, says company CFO S Mahalingam. The overall industry impact should be in that range. But MAT will only be an asset for us rather than an object in the profit and loss statement, he said.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - About Us

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions