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Adverse Arbitral Rulings Spurred Retro Tax Erasure

The adverse verdict in the international arbitration case on retrospective tax filed by Vodafone Group last year got policymakers thinking that India needed to bite the bullet and bury the controversial provision to send out a strong signal to global investors, said people aware of the matter.

Another setback in the arbitration case filed by Cairn Energy in December 2020 gave further impetus to the idea, they said, adding that an hour-long presentation to Prime Minister Narendra Modi sometime in June clinched the matter.

After the PM’s go-ahead, the finance ministry readied the bill and took it to the Cabinet in 15-20 days. The amendment to remove the retrospective provision of the 2021 law, and the note for the consideration of the Cabinet, were drafted by senior officials themselves to ensure the information did not trickle out.

Last Friday, the Lok Sabha passed the Taxation Laws (Amendment) Bill, Which Proposes to scrap the retrospective application of the 2021 amendment to the income tax law for indirect transfer of Indian assets. S-ET

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