Retro tax ban won’t dilute sovereign right to tax: FM
THE FM SAID THE BILL PROPOSES TO AMEND ‘A CLARIFICATORY AMENDMENT’ THAT WAS BROUGHT IN BY THE UPA IN 2012
NEW DELHI: Finance minister Nirmala Sitharaman said the amendment to retrospective income-tax law will not dilute India’s sovereign right to tax before the Rajya Sabha on Monday passed the bill to scrap the 2012 legislation that caused about one-and-a-half dozen litigations, including two arbitrations evoked by Vodafone Plc and Cairn Energy Plc in foreign tribunals, which India lost last year.
While moving the Taxation Laws (Amendment) Bill, 2021 in the Upper House on Monday, Sitharaman said it proposes to amend “a clarificatory amendment” that was brought in by the Congress-led United Progressive Alliance (UPA) in 2012 and became contentious because of its retrospective application.
She said that the bill would not anyway dilute India’s sovereign right to tax. “We are keeping the sovereign right of India to tax absolutely intact,” she told the House. The bill was passed in the Lok Sabha on Friday.
The finance minister said the controversial amendment was made about nine years ago, ignoring the Supreme Court’s ruling. The amendment was made after the apex court in 2012 gave a verdict that gains arising from indirect transfer of Indian assets were not taxable under the extant provisions of the Income Tax Act. “The idea is, a sovereign government has right to tax, but to apply it in retrospect has created a lot of discontentment,” she said.
Addressing the Chair, Sitharaman said: “It was a clarificatory amendment against a Supreme Court order brought in by the Congress Party, and they didn’t do any correction to it.” Reacting to the walkout by the Congress from the House, she said when the bill was passed by the Lok Sabha on August 6, a former finance minister belonging to the party welcomed it by saying it should have come earlier. She did not name the former finance minister.
She said the amendment would send a message to the global investors’ community that “India is a responsible democracy.”
“We take our laws seriously, particularly the tax related laws. We want to be sure that there is a consistency. And without consistency in your taxation, obviously businesses are not going to be able to go forward.”
The Rajya Sabha on Monday passed two other key bills, including the amendment to the retrospective tax law amid the Opposition protesting over the Pegasus snooping controversy, three contentious farm laws and rising fuel prices. The other bills passed were the Tribunal Reforms Bill, 2021, and the Central Universities (Amendment) Bill, 2021.