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Will Talk to Cairn, Vodafone; Refund without Interest: FM

Finance minister Nirmala Sitharaman said the government will hold talks with companies such as Cairn Energy and Vodafone Group after the law to scrap the retrospective tax clause is enacted, adding that the government will only refund the amounts that were paid by the companies without any interest.

“Discussions with the litigants will happen after the enactment of this law and once it is passed we are confident that they would also find the provisions very useful and probably consider taking into consideration what we brought in,” Sitharaman said responding to discussion in Rajya Sabha on Monday. She added that the changed provisions had “hardwired” the conditions into the Act itself, including one where the government will only refund the amount that were paid under the tax disputes and will not pay interest if companies come for settlement.

“I am sure this will be appealing enough and put an end to this ghost, which we have been carrying all this while form 2021,” she said.

The government will refund Cairn Energy about Rs. 7,879.73 crores, to Vodafone Group about Rs. 44.74 crores and about Rs. 48 crores to another company, Sitharaman said.

The finance minister, however, said that while the changes to the law were being brought in to clear uncertainties for businesses and provide consistency in policy, India’s right to tax will be kept as is and would not be affected.

“Even as we are doing this, the sovereign right that India has to tax is not being questioned. I am not here to say that we are doing something to dilute that, not at all. We are keeping the sovereign right of India to tax absolutely intact,” she said.

She added that rules enabling the provisions in the Act and procedures will be prescribed by the government.

She further said that the step to strike down the retrospective application of the law could not be taken earlier as former finance minister Arun Jaitley had said the government would wait for the ongoing two cases to reach their logical conclusion. In September 2020, the government lost the arbitration award to Vodafone Group and in December 2020, it lost the arbitration to Cairn Energy.

She added that the cases were studied in detail and since the budget session had to be shortened, the government introduced the bill at the next available opportunity.

Rajya Sabha returned the Taxation Laws (Amendment) Bill 2021 to Lok Sabha after it was cleared by voice vote after a brief discussion.

The bill amends the Finance Act 2012 and the Income Tax Act 1961 to scrap demands raised on transactions prior to May 28,2012, when the provision to tax the indirect transfer of Indian assets came into effect.

It also provides a framework for resolving international arbitration cases that the government has lost, subject to certain conditions.

The government will withdraw all tax demands levied retrospectively and also refund taxes collected and settle cases if companies withdraw challenges filed in all legal for a.

This means that litigation in the high courts, Supreme Court or other forums, including proceedings of arbitration, conciliation or mediation under any treaty, will have to be withdrawn by the companies.

The companies should also give an undertaking that they won’t seek costs, damages or interest. The entities will also have to waive their rights on pursuing any claims.

The government will refund all taxes collected without interest. The provisions of the law will only apply prospectively form a May 28,2012.

Sitharaman said there were 17 cases stemming from retrospective tax law, of which two were pending in high courts and two had gone into arbitration.

The government has said it was undertaking the amendments to bring tax certainty for potential investors at a time when India is being pitched as an investment destination, and foreign income will aid in faster economic recovery and employment amid the Covid-19 pandemic. S-ET

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