The government is considering modifying the minimum alternate tax regime.

As industry demands a system of carry forward of credits, if not doing getting rid of it altogether, the government may tighten the norms to check under-reporting.

"Though industry bodies are seeking changes, it is meeting the purpose for which it was put in place and we do not see any immediate need to do away with it," a senior finance ministry official told Business Standard.

Officials in the Central Board of Direct Taxes were of the opinion that there was scope for further tightening of the norms.

MAT, a presumptive tax to check under-reporting, was introduced in 1987 and was discontinued in 1990. It was re-introduced in 1996 with a larger base to cover, including forex earnings. In 2000, MAT was fixed at 7.5 per cent of the book profit.

The tax is applicable even when there is no taxable income and is also levied on infrastructure companies, which are exempted from payment of tax for a period of 10 years under Section 80 IA of the Income Tax Act.

The advisory group on tax policy for the Tenth Plan headed by Parthasarthi Shome, who is now adviser to the finance minister, had favoured doing away with dividend tax by delinking it from book profit as there was still scope for under-reporting. It had suggested that MAT be levied on a combination of net worth and dividend distributed.