leading private sector companies like reliance communications great eastern shipping sun pharma bharti airtel suzlon energy and hcl technologies may see their tax liabilities go up this year though the burden could be lower in subsequent years so would some their it peers finance minister pranab mukherjee has proposed a five percentage point hike in the minimum alternate tax mat paid on book profits taking the effective mat rate to around 17 from 11the increase in the basic mat rate from 10 to 15 will result in higher cash outflow for zerotax companies at a time when most industries are facing credit crunch imposing higher tax for which credit may be available in future seems to be out of sync with the finance ministers claim that this budget is the first stimulus for the economy said shefali goradia partner bmr advisors besides the rate hike the base for mat has also been raised till now any decline in the value of assets could be netted off to arrive at the base for calculating mat not any more now any diminution in the value of assets will have to be added back to the book profit which serves as the base even more disturbing fact is that the amendment is retrospective from april 1998 said ketan dalal executive director tax regulatory practice pricewaterhousecoopersbut the good news is that the government has allowed companies to carry forward mat credit and set it off against the normal tax liability for 10 years according to sunil badala partner bsr co the fact that mat is not a permanent cost and it is only a timing issue has not been highlighted well said dinesh kanabar leader tax regulatory practice pricewaterhousecoopersrevenue compulsions have perhaps forced the government to hike mat rate as companies continue to enjoy a host of other tax exemptions the levy was introduced by former finance minister p chidambaram in his 199697 budget to bring zerotax companies under the tax netthe intention was to discourage such companies from arranging their tax affairs in a manner that would result in huge book profits and a substantial dividend payout but no tax liabilityto start with companies had to pay a 75 mat on their book profits mr chidambaram raised the rate to 10 in 200607 norms were also tightened making it mandatory for companies that invest in shares to include longterm capital gains while computing their book profitswith the budget proposal the effective mat rate for domestic companies would work out to 16995 including the surcharge and education cess these companies can set off mat against their future tax liability to cite an example a company which has a tax liability of 20 this year and pays a mat of 17 gets a 3 credit if the tax liability works out 14 next year it can use the credit and pay a tax of 11mat has to be paid by foreign companies having a permanent establishment in india however with indian