Budget 2012: Port projects should be completely exempt from MAT, says FICCI Close.

NEW DELHI: Any profits or gains arising from transfer of a qualifying asset are chargeable to income-tax as capital gains. Such profits, being not considered as 'core shipping income' are also subjected to MAT. This results in double taxation of the same income. FICCI in its pre-budget memorandum has recommended that book profit on sale of qualifying assets should be treated as 'core shipping income' and should be excluded from book profits while computing MAT liability.

FICCI has also given the following recommendations for the shipping & ports sector:

> Port projects should be completely exempt from MAT.

> Port projects should be exempt from payment of Dividend Distribution Tax.

> In respect of revenue share or royalty or wharfage or any other revenue payable to the Port Authority, 150% deduction shall be permitted.

While input services consumed by the shipping industry are taxable, these services consumed in sea transportation to a place outside India though in the nature of export of service are not eligible for credit [(not covered by section 65(105) (zzzzl)].

This leads to an anomalous situation where services used for export get taxed and this tax gets exported as they add to the transaction cost. Obviously this is an unintended consequence and need to be remedied by zero rating the service. Input services consumed in export of goods should be exempted from service tax.

Source : economictimes.indiatimes.com