Bring down MAT to 10%

Bring down MAT to 10%

The upcoming Union Budget provides an opportunity to put in place levers to strengthen the demand situation in the economy. This is important to impart momentum to the capex cycle and put GDP back on high growth track.

Indian power producers have proposed to the government a slew of tax benefits to incentivise investments in the power sector and re-invigorate private sector investment, which has been sluggish for the past two years.

The Independent Power Producers Association of India (IPPAI) in a letter to the ministries of finance, coal and power asked the government to extend a 10-year tax holiday to companies that start power generation by March 31, 2020.

The association has also asked for minimum alternate tax to be reduced to 10 per cent.

Clean energy cess

The IPPAI has also contested the clean energy cess levied on thermal power producers asking for it be restricted to only those power producers who do not adopt clean technologies/ modernise their plants.

Even though generation is exempt from CENVAT (Central Value Added Tax), excise and value-added tax, taxes on power generation equipment and other inputs remain embedded in the cost of power.

The overall impact of the present taxation regime at both the central and state levels leads to higher price of power.

According to IPPAI, the power transmission and distribution (T&D) sector should be granted the infrastructure industry status and that all related tax benefits available to other infrastructure sectors be given to this sector as well. Such a move will likely to pass on the benefits of cheaper power produced from power projects to the end consumer.
With regards to coking coal, IPPAI has asked for reduction in customs duty on it.

“Import duty of coking coal had been increased to 2.5 per cent in the budget for 2014-15.” It said a negligible quantity of coking coal was available domestically and, therefore, called for duty on it to be exempt.

(The author is a Senior Analyst at IPPAI)

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