Centre Introduces Bill To Scrap Retrospective Tax Law – All You Need To Know

As per the bill, the tax demands made on asset transfers prior to May 28, 2012, will be withdrawn.

Centre Introduces Bill To Scrap Retrospective Tax Law - All You Need To KnowFinance Minister Nirmala Sitharaman | PTI

The Union Finance Ministry introduced a bill in the Lok Sabha on Thursday to scrap the retrospective tax law. The bill introduced in Parliament will bury the ghost of retrospective taxation. 

As per the bill, the tax demands made on asset transfers prior to May 28, 2012, will be withdrawn.

The bill brought in Lower House today will withdraw all back tax demands on companies such as Cairn Energy and Vodafone. While presenting the bill, Centre said it will refund about Rs 8,100 crore collected to enforce such levies.

“It is also proposed to refund the amount paid in these cases without any interest thereon,” the bill said.

The retro tax provision was introduced by the former Congress-led UPA regime in Finance Act 2012.

The retrospective taxes, besides reating uncertainly in minds of investors, have been overturned by international arbitration tribunals in two high profile cases – UK telecom giant Vodafone Group and oil producer Cairn Energy.

Reacting to the development, Cairn, as quoted by news agency PTI, said it has “noted” the introduction of the bill and is “monitoring the situation and will provide a further update in due course.”

Meanwhile, Finance Secretary T V Somanathan informed that a total of Rs 8,100 crore was collected using the retrospective tax law. Of this, Rs 7,900 crore was from Cairn Energy alone. After the passage of the bill, this money will be repaid.

“The government’s policy since 2014 has been that we do not support retrospective taxation. We need to also remember that this is a time when India needs a lot of investment. These were legacy disputes which dated back pre-2014,” Somanathan said.

He said the government defended in arbitration India’s sovereign right to tax and waited for the cases to reach their logical conclusion. “So it has been a balancing effort between the principle of sovereign right to tax and relief to those on whom taxes were due.”

Meanwhile, Finance Minister Nirmala Sitharaman’s bill stated that income-tax demand had been raised in 17 cases and the retro tax was criticised for being against the principle of tax certainty and damaged India’s reputation as an attractive destination. It was a sore point for potential investors.

The bill even proposed that the tax on indirect transfer of Indian assets made before May 28, 2012, shall be deemed null and void on furnishing of undertaking for withdrawal of pending litigation.

Leave a Reply