RETROSPECTIVE TAXATION

International trader groups representing more than 2500000 companies have told our Prime Minister Manmohan Singh that his government’s new retrospective tax proposal have led foreign businesses to reassess investment in the country.

I want to discuss the retrospective tax proposal of the government here. What is given in it?

Finance minister said that cross border merger and acquisition would be retrospectively taxed which will affect deals like VODAFONE- HUTCHINSON transaction.

It means any asset registered or incorporated outside India shall be deemed to be situated in India if the share or interest derives its value from assets allocated in India. This amendment would take place retrospectively from 1April,1962. This amendment is widely seen as inimical to foreign investments in India.

According to me, this decision may adversely affect growth of India as foreign investors would not show interest in investment in India.

Finance bill will be presented in parliament in May,2012. Lets hope government will review its decision.

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