The proposed direct tax code should exempt infrastructure companies from imposing the minimum alternative tax (MAT) or levy lower level of MAT to facilitate the growth of public-private partnership projects in the country.

"Imposition of MAT on infrastructure companies will put pressure on the operating margin and may hinder the growth of PPP model projects in the country," N Rangachary, former chairman of CBDT and IRDA, said in a workshop arranged by the Bangalore Chambers of Commerce and Industry on Direct Tax Code here.

He also said that as infrastructure projects had long gestation period with huge capital needs, DTC should have special concession for these companies.

The Centre has proposed to implement a new direct tax code in April, 2011, by replacing present Income Tax Act for simplifying tax regulations in the country. Recently, the revised draft of DTC have been released for public consultation and is expected to be passed by Parliament in the winter session.

While infra companies will not get tax exemption benefit under 80 IA under proposed new norm, levy of MAT will obstruct private fund flow into infra sector. "Though there is status quo being maintained on imposition of tax on book profit, complete exemption from MAT or lowering of MAT rate will favour infra growth in the country," K R Girish, partner, KPMG, said.

Similarly, the proposed withdrawal of tax incentives for SEZ under DTC will adversely impact the growth of small and medium scale industries in the SEZ unit.

"While there are no tax incentives available to SEZ units set up post April, 2011, the revised framework of DTC is still not clear about availability of tax holiday for expansion carried out by existing SEZ units," Girish said. Further, tax calculation on the basis of investment and not on profit will burden the SME units in the SEZ, he added.

As per the revised draft of DTC, issues like MAT exemption to SEZ unit, and lack of clarity on continuance of present framework may pose challenge to the future growth of SEZ unit. However, industry experts said that the present anomalies in the draft code is expected to be modified before final approval.

"The Government is serious about providing tax concession to infrastructure companies and an enabling environment is expected from the Centre regarding this," K R Sekar, chairman of direct taxes expert committee, BCIC said.

He said, centre was expected to take measures to protect SMEs in SEZs which could be affected post DTC.