PC gets Budget hangover on oil pool

BUDGET 2006: FM discusses about taxes and the GDP growth.

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Keywords: Interview, Post-budget

Chidambaram: We are only talking about MAT companies, unless you tell me that all companies in India are MAT companies. A MAT company by definition is a profit making company. It is because of the spate of exemptions, it does not offer any profits for tax. The question is should you exempt 100% from its tax liability, or should you exempt a smaller proportion of its tax liability.

If the tax liability was Rs 100, it was bound to pay tax of Rs 30 as a normal company. The MAT company paid Rs 7.5 which means the taxability was 25% and the exemption was 75%. Now the exemption for the MAT company is only 66 and two third percent and you would be taxed for 33 and one third percent.

Raghav: Are you saying that if I am a profit making company not a MAT paying company and if I have gains of long-term capital gains, I am not covered? So that is very clear that this 10% is only for MAT companies.

Chidambaram: Only under section 115(JB), which applies only to MAT companies.

Raghav: One more little complication added, one more exemption added. Last time you had said all long-term capital gains on equity is gone and now for companies who are paying MAT they have to now keep a track of that?

Chidambaram: Between 1997 and 2004, this was included in the MAT profit and only in 2004 we removed it.

Raghav: And now you bought it back?

Chidambaram: But that I believed was a mistake and now we have corrected that mistake. There was no reason why a MAT company, which otherwise makes profits should have its treasury management profits not included in MAT base.

Raghav: Differential excise on cars, this was not expected from someone who takes a broad view or top-angle view. This is like the old days of what the Finance Ministry decides what the consumer of India should buy?

Chidambaram: Sorry, this is not for the consumer of India and I made it clear in the SIAM meeting that I will look into the small car issue because there is a great opportunity, which you people are missing. It is an opportunity to make India a hub for manufacturing small cars.

Raghav: But you could have given a set off for exports, why give only for small cars?

Chidambaram: Unless the domestic demand expands you cannot build and export cars. I have spoken to Korean, Japanese and Indian manufacturers, while they understand why there should be a 21% excise duty on cars, their unanimous demand is that we have an opportunity and lets not miss the bus.