The Revised tax framework on Infrastructure Trust (InVit) will exempt Dividend Distribution Tax (DDT) in respect to distributions made by SPVs to the infrastructure trusts. Guidelines on InVit were announced as part of the budget of 2014 & 2015.
However, there have not been any cases of listed InVit in India in last two years. We are very pleased with the final changes announced in the Budget 2016 as it will put into effect the original idea of granting DDT exemption to listed infrastructure trusts. This amendment will ensure there is single level taxation, thereby making the structure tax and cash flow efficient.
Infrastructure trusts are one the most efficient vehicles to attract equity from long term investors like pension funds, insurance companies and other institutional investors. Globally these products are very popular under different names like Master Limited Partnership (MLP) and Yield Co in the USA and Business Trusts in Singapore. MLP alone has total market capitalization in excess of US $ 275 Billion in the USA alone.
We feel that the amendment introduced in this budget will encourage developers to pursue their InvIT listing plans. It is possible to create market capitalization in the range of USD 20-40 billion over next 3 years by listing InVits in the Indian market. . This will release the large equity that is locked in Project SPVs. The release of cash will allow these developers to once again bid for new PPP projects and this will mark the beginning of new investment cycle.