Government puts a stop mark on the retro tax, to boost make in India

#RetroTax #makeinindia #AatmanirbharBharat

Govt. stops retro tax

The Government has ordered to nullify the retrospective tax clauses that were introduced in 2012 to bring past indirect transfer of Indian assets under the ambit of taxation. Experts say, it’s the right call India government has taken in drawing the curtains on the retrospective tax. The country needs to strengthen the confidence of investors, not dangle the sword of uncertainty over them. The amendment for retrospective taxation yielded no revenues, only brought about disrepute to the government. The government proposes to refund the principal amount in full to the litigants, but the companies will need to withdraw the cases and furnish undertakings that they won't claim cost damages or interest. It recognises the importance of certainty in tax laws which is a key factor in ensuring confidence in India as an attractive investment destination and expressed strong ambition for an Aatmanirbhar Bharat.

The retrospective applicability of this provision met with sharp criticism. On 5th August, the ghost of this retrospective tax has been finally laid to rest. The government has introduced The Taxation Laws (Amendment) Bill, 2021 to undo this insidious provision from the Finance Bill, 2012. This will potentially help resolve 17 cases in which income tax demand had been raised. In two high profile cases—Cairn and Vodafone—the corporate entities had already won various legal and arbitration awards. The order says, the government will not raise tax demands in any such case if the transaction occurred before 28 May 2012. Any demand already raised will be withdrawn and any taxes collected will be paid back for the principal amount. In the cases where litigation is pending, this will be done after the impacted corporate party gives an undertaking not to contest the case further. This is a welcome move and also a practical implementation plan.

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