Minimum Alternate Tax—India Case Study

India’s corporation income tax has been beset with tax incentives that reduce the tax base, adversely affect neutrality in the tax system, and reallocate resources between industry sectors and commerce. They also reduce revenue collection as is evident in the government’s annual calculations of revenue loss from tax incentives in its annual budget, an exercise that began in 2006. Continuing depletion of the revenue base generated an early interest in a minimum alternate tax (MAT) in India. In this chapter, we study the emergence, trajectory and behaviour of the Indian MAT. MAT was introduced in 1987, while an AMT was introduced in 2012 on entities other than companies. The MAT itself underwent many changes including removal and rate changes. Its time series relationship with the corporation income tax is estimated and analysed. While the chapter shows in some detail how the Indian MAT has to be calculated by a taxpayer, it also proposes an alternative MAT base that combines a stock and a flow concept, that is an asset and an income combination. That would amplify the minimum revenue contribution behind a MAT by closing possible gaps that enable taxpayers to minimise their revenue contribution to the corporation income tax.