Tax treaty benefits are prompting investors to route their investments from Mauritius into India, WTO has said.
Between 2010—11 and 2013—14, Mauritius was the largest source of FDI, followed by Singapore, except in 2013—14.
“It would appear that part of these large flows may result from the advantages of the tax treaty between Mauritius and India, which may make it attractive for investors to route their investment through Mauritius to take advantage of the preferential provisions, which include exemption from capital gains tax,” according to a report prepared for the sixth Trade Policy Review of India, by the WTO.
As per the Department of Industrial Policy and Promotion (DIPP), India had received $ 9.49 billion in 2012—13 and $ 4.85 billion in 2013—14.
In 2013—14, India attracted $ 5.98 billion foreign direct investment from Singapore.
It said that Foreign Direct Investment (FDI) inflows have been strong in services including financial, banking, insurance, business, outsourcing, R&D, courier, and technical services, and the automobile industry and telecommunications.
However, FDI flows into India through Mauritius are estimated to have gone down from the last couple of years due to concerns of General Anti—Avoidance Rule (GAAR) and other steps taken by Indian government.
FDI from other countries, including the US, the Netherlands and Germany, are increasing.
Investment from the US has increased to $ 1.69 billion during April—February 2015 from $ 806 million in 2013—14 and $ 557 million in 2012—13.
Similarly, FDI from the Netherlands has increased to $ 3.29 billion during April—February 2015 from $ 2.27 billion in 2013—14 and $ 1.85 billion in 2012—13.
During April—February 2015, India has received $ 8.44 billion foreign inflows from Mauritius.
The report also said that India has bilateral investment promotion and protection agreements that are in force with 72 countries and regions. In addition, Bilateral Investment Treaties (BITS) with 14 countries have been signed but are not yet in force.
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