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India’s retrospective tax law amendment, which nullifies the tax demand raised for indirect transfer of Indian assets made before May 28, 2012 on fulfilment of specified conditions, can help attract more foreign investment to India as it sends out a clear message that the country is welcoming to business, the UK India Business Council (UKIBC) has said.
Negotiations on the proposed India-UK Free Trade Agreement (FTA), that are to begin soon, would also get a boost as the passage of the legislation underpins the credibility of a successful and welcome outcome, according to a statement put out by the UKIBC.
“We at UKIBC believe this is a hugely positive step in promoting India as a progressive business environment. The UKIBC has been engaging with the Government of India on this topic for a long time. Businesses need certainty when making investment decisions and to protect shareholders. The Taxation Laws (Amendment) Bill sends a clear message that India is truly open and welcoming to business,” said UKIBC Chair Richard Heald.
The Taxation Laws (Amendment) Bill, 2021 was introduced by Finance Minister Nirmala Sitharaman in the Lok Sabha on Thursday. The Bill, which has been passed by the lower house without any discussions, seeks to withdraw tax demands made using a 2012 retrospective legislation to tax the indirect transfer of Indian assets. The government informed Parliament that Cairn Energy Plc and telecom giant Vodafone, in addition to at least 15 other companies, will benefit from the move.
The UKIBC had been pursuing the matter for a long time with the Finance Ministry and had often said that the retro tax disputes between British conglomerates Cairn Energy and Vodafone Plc and the Indian government led to uncertainty within the UK business community and needed to be resolved to boost investment ties.
India and the UK are scheduled to shortly start negotiations on a bilateral FTA to boost trade and investment between the two countries and the tax law amendment would provide a strong foundation for trust, the industry body said.
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