<div><strong>Simar Singh</strong></div><div> </div><div>In his quest for foreign investment, Prime Minister Narendra Modi on Tuesday (6 October) clarified that his Government will not invoke any tax law retrospectively. This is likely to be a huge balm for global investors eyeing India. ”We have articulated very clearly that we will not resort to retrospective taxation and reinforce this position by not going for imposition of the Minimum Alternative Tax," said Prime Minister Modi in Bengaluru. Modi was in the city today with German Chancellor Angela Merkel at the Indo-German Summit.</div><div> </div><div>For some years now India has been battling a negative image as far as its tax regime is concerned. It was in 2012 that the then finance minister, Pranab Mukherjee, had introduced a provision to tax capital gains made by foreign companies in the country, retrospectively, a move that was single handedly branded the country as a “tax-terrorist”. This move by Mukherjee was to ensure that telecom giant, Vodafone coughed up Rs. 20000 crore that was allegedly due to India in capital gains tax.</div><div> </div><div>After Modi’s thumping victory that ushered him into the prime ministerial seat in 2014, many thought that the pro-business politician’s first budget would scrap the retrospective tax. However, it was a disappointment when Finance Minister Arun Jaitley delivered his budget speech in July 2014 and did not repeal this provision. In fact, in the last one year the tax department of India has sent out a notice to British energy giant Cairn Plc under Section 9 of the Income Tax Act, retrospectively.</div><div> </div><div>But the PM’s assurance today is likely to go a long way in allaying fears of global investors about an adversarial tax department in India. In fact, in a speech at Columbia University today, finance minister Arun Jaitley also mentioned India’s stance about retrospective taxes. He said that, “we(India) lost credibility with the world" because of the retrospective taxation issue.</div><div> </div><div>India’s assurances on tax matters go out after the recent controversy with FIIs over Minimum Alternate Tax. But the top leadership of the Government have gone on record to clarify that they are working towards a stable and predictable tax regime in India.</div>
