On Thursday, the government took the first step towards repealing the controversial 2012 Arrears Tax Act, which was used to assert large tax claims on foreign investors such as Vodafone and Cairn and resulted in a foreign court freezing order against India. active abroad.
Finance and Business Minister Nirmala Sitharaman on Thursday released the Tax Bill (Amendment) to Lok Sabha, to overturn the arrears tax provisions that were enacted in 2012 for the indirect transfer of previous Indian assets into below the tax rate.
Under the proposed changes, all tax claims made on transactions that took place before May 2012 will be revoked and all taxes collected will be refunded, but not interest rates. To be eligible, affected taxpayers would have to drop all pending lawsuits against the government and promise not to make any claims for damages or costs.
Experts hailed the move because it would end the spectre of political uncertainty for potential investors, which has seen the Vodafone and Cairn cases unfold over the past decade.
“This could help restore India's reputation as a fair and predictable regime, in addition to helping end unnecessary, lengthy and costly litigation,” Pranav Sayta, tax partner at EY said.
The late former finance minister Pranab Mukherjee introduced the right to collect taxes after the Supreme Court ruled that Vodafone could not be taxed on a 2007 transaction involving the purchase of a 67% stake in Hutchison Whampoa with worth 11 billion dollars. This tax was then brought against Cairn because a corporate reorganization was carried out in 200607 and its assets were frozen by the authorities.