New Delhi: The decision to reverse the retrospective tax laws passed by the previous government was to correct the past mistakes and it has increased the trust between the industry and the government, Prime Minister Narendra Modi told industry captains on Wednesday. Addressing the 75th annual meeting of the industry body Confederation of Indian Industries (CII), Prime Minister Modi said the tax policies of previous governments used to cause pessimism among investors whereas policies of his government have restored the confidence in the industry.
"Recently, we took a decision to correct the past mistakes by abolishing the retrospective taxation. The way this decision has been praised by the industry, I am confident that it will further strengthen the trust between the industry and the government," said the Prime Minister. On August 5, the Lok Sabha passed the Taxation Laws (Amendment) Bill, 2021 that allows the government to withdraw tax demand in 17 cases, including two high profile tax cases related to Vodafone's acquisition of Hutch Telecom's India operations and transfer of Indian assets by Cairn India holdings to its counterpart, Cairn India in an internal restructuring.
In May 2012, during Prime Minister Manmohan Singh's tenure, then finance minister Pranab Mukherjee amended the Income Tax Act to retrospectively tax deals involving transfer of assets located in India by foreign based firms after the income tax department's notice was invalidated by the Supreme Court.
Read: PM announces mission to make India self-sufficient in edible oils
Prime Minister Modi's government last year lost two separate arbitration proceedings against Vodafone and Cairn Energy and Cairn Energy's dogged pursuit to seize Indian assets abroad to enforce the arbitration award forced the government to realise the futility of pursuing such cases in international courts and arbitration tribunals.
The Bill passed by the Lok Sabha last week will allow the government to settle 17 such cases, including the cases related to Vodafone and Cairn Energy, if the companies accept the refund without any interest, cost of litigation and penalty. In the statement of objects and reasons of the Bill, the government admitted that protracted litigation was hurting India's image as an investor-friendly nation at a time when the country was seeking foreign capital to shore up its economy battered by the outbreak of Covid-19 global pandemic.
India has most competitive corporate tax
Talking about his government's efforts to attract foreign investment, the Prime Minister said that a country like India that was once apprehensive about foreign capital, is now welcoming all kinds of foreign investment in the country. “A country like India whose tax-related policies once used to cause pessimism among the investors, today, the same India has the world's most competitive corporate tax rate in the world, said the Prime Minister, adding that now the country also has a faceless and transparent tax assessment system.
Govt not afraid of bold reforms: PM
Prime Minister Modi assured the industry captains about his government's desire to take bold economic reforms in sensitive sectors such as agriculture and labour law reforms. “Friends, today, there is a government in power that is willing to take the biggest of the risks in the interest of the nation,” he told the gathering which included industry leaders such as N Chandrasekaran, Chairman of Tata Sons; Uday Kotak, MD and CEO of Kotak Mahindra Bank; TV Narendran, CII President and CEO and MD of Tata Steel; Baba Kalyani of Bharat Forge Group, among others.
“You people would recall that the GST was stuck for so many years just because of one reason that the earlier government was not willing to take political risk. Not only we implemented the GST but today we also saw record GST collection,” the Prime Minister added.
Read: Kerala Tourism launches 'bio-bubble' model to woo tourists
