India’s scrapping of controversial retrospective tax law given cautious welcome
- Move paves way for Asia’s third-largest economy to settle as many as 17 long-standing tax disputes with foreign investors. It is expected to cough up US$1 billion in refunds if firms drop litigation
- British energy firm Cairn and telecoms giant Vodafone were among those challenging New Delhi’s tax claims
India’s move to abolish a controversial law that allowed it to tax foreign investments retrospectively has been cheered by analysts, though they remain cautious about how the decision will boost its image as a business-friendly destination.
The decision, made by the lower house of parliament last week and approved by the upper house late on Monday, paves the way for Asia’s third-largest economy to settle as many as 17 long-standing tax disputes with foreign investors.
The 2012 law had led to disputes with companies including British energy firm Cairn and telecoms giant Vodafone, which challenged New Delhi’s tax claims via international arbitration.
Vodafone has challenged New Delhi’s 200 billion rupee (US$2.69 billion) claim in past taxes with an arbitral tribunal ruling that the move was a breach of fair treatment under a bilateral investment pact between India and the Netherlands.
To settle the disputes, India is expected to cough up US$1 billion worth of refunds to the companies provided they withdraw ongoing litigation.