India plans to scrap retrospective tax law

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Analysts say India’s move to repeal legislation that taxed corporations retroactively, resulting in billion-dollar court battles, is a much-needed course correction that would help improve the country’s economic climate. The action is intended to help the government avoid legal battles with corporate entities such as Vodafone, a British multinational telecommunications corporation, and Cairn Energy, a British oil and gas company.
The Taxation Laws (Amendment) Bill, 2021, was passed by the Lower House of Parliament on Friday (Aug 6), removing retrospective taxation of indirect transfers of Indian assets before May 2012. The bill now moves to the House of Representatives, where it will await presidential assent. The elimination of this tax has long been a demand of businesses, with analysts claiming that it has harmed India’s image in the last decade.
Mr. Pranav Satya, a partner at Ernst & Young India, said, “It recognizes the importance of clarity in tax legislation, which is a vital aspect in assuring confidence in India as an attractive investment destination.”
The previous Indian National Congress-led administration enacted the retrospective tax bill in 2012. It was also considered highly controversial at the time and had terrified foreign investors while casting a shadow over India’s regulatory environment’s stability.

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