InvestorQ : What are your quick thoughts on the government withdrawing retrospective taxation?
indhumathi Sayani made post

What are your quick thoughts on the government withdrawing retrospective taxation?

Answer
image
4 months ago
Follow

In fact, the move is a tad too late, although I must say it is better late than never. Here is what you must know about the announcement and the implications.

· The legislation to scrap retrospective taxation has been introduced in Lok Sabha. This will put at rest the raging debate about retrospective taxation of foreign investors.

· Retrospective taxation, actually, gave the CBDT the right to open old cases where it suspected legitimate tax was not paid. Some of the targets include Cairn and Vodafone.

· In the case of Cairn, government held back their tax refund and sold shares of Vedanta in Cairn’s demat account to recover the dues. Now India owes Cairn $1.2 billion.

· Both cases created a problem for India. Cairn threatened to confiscate assets of Air India and Vodafone India is now on the brink of bankruptcy and needs state support.

· If the government needs to syndicate a sale deal for Vodafone Idea, then it needs clarity on the retrospective taxation to find buyers. That was the urgency.

· India may be technical right in the Cairn and Vodafone case that smart structures were used to avoid tax but global tribunals go by the rule book and not perceptions

· For Make in India and PLI to succeed, primary focus must be foreign investment and an enabling environment. That calls for a consistent tax regime. Retrospective tax had no place in such a scenario and the removal is surely well timed!

3 Views