Retrospective IT law will not override India’s sovereign right to tax: FM

The Rajya Sabha has issued the bill to be scrapped on Monday, due to which an array of stark conversations and litigations followed including the international arbitration by Vodafone Plc and Cairn Energy Plc, associations which India lost past year.

By Sneha Sengupta On August 10, 2021 13:19 IST

Retrospective IT law will not override India’s sovereign right to tax: FM

Image Credit: The Print

On Monday, Finance minister Nirmala Sitharaman told Rajya Sabha that the amendment made to the 2012 retrospective income tax law will not override India’s sovereign right to tax. The Rajya Sabha has issued the bill to be scrapped on Monday, due to which an array of stark conversations and litigations followed including the international arbitration by Vodafone Plc and Cairn Energy Plc, associations which India lost past year.

“The Taxation Laws (Amendment) Bill, 2021, proposes to amend “a clarificatory amendment” that was brought in by the Congress-led United Progressive Alliance (UPA) government in 2012 and became contentious because of its retrospective application,” the finance minister added while implementing the bill.

“The bill would not in any way dilute India’s sovereign right to tax.” “We are keeping the sovereign right of India to tax-absolutely intact,” Sitharman averred the Upper House. “The controversial amendment was made about nine years ago, ignoring a Supreme Court ruling”, she added.

“The idea is, a sovereign government has the right to tax, but to apply it in retrospect has created a lot of discontentment,” she reiterated. “It was a clarificatory amendment against a Supreme Court order brought in by the Congress and they didn’t do any correction to it.”

“The amendment would send a message to global investors that India is a responsible democracy. We take our laws seriously, particularly the tax-related laws. We want to be sure that there is consistency and without consistency in your taxation, obviously, businesses are not going to be able to go forward,” the minister reassured.

On Monday the Rajya Sabha was passed along with two other bills: the Tribunal Reforms Bill, 2021, and the Central Universities (Amendment) Bill, 2021.

The amendment bill adopted its pace on Thursday in the Lok Sabha and passed it the very next day. The move is extensively appreciated as an investor-friendly move that’ll initiate the end of chaotic litigation and arbitration.

The prime motive of this bill is to amend the I-T Act, 1961, and the Finance Act, 2012, which were issued during the tenure of the former finance minister Pranab Mukherjee to bring into light the retrospective tax law, since then it created a stance for all that this amendment is bad for India’s tax regime.

“The proposed amendment to change the retrospective nature of taxation of indirect transfer would also have to factor while determining the rules on how to cover the refund cases where no appeals are filed and/or pending or where they are settled under the VsV (Vivad se Vishwas) scheme,” averred Amrish Shah, partner at consultancy firm Deloitte India. “That would be a fair and equitable way to also reward taxpayers who have either not disputed or settled the dispute on this count,” Shah added.

Source Mint