Rise in MAT to affect cashflows, say experts

The 2010 Budget proposal to increase the overall minimum alternate tax (MAT) to 18 per cent from 15 per cent will have a negative impact on the companies' cash flows, say experts.

However, the finance minister said the increase in MAT will reduce the gap in corporate taxes paid by MAT and non-MAT paying firms.

''This will promote inter-se equity among corporate taxpayers,'' said Pranab Mukherjee, finance minister in his Budget speech.

MAT is imposed on profitable companies which do not fall under the corporate tax net because of various exemptions.

The revision of the rate of MAT is expected to collect additional revenue of around Rs4,035 crore in 2010-11.

The increase will affect the bottom-line of some companies in the IT sector, as well as oil companies that have set up operations in economically backward regions to avail tax holidays.