The government’s recent move to scrap retrospective tax shows undoing of a mistake made in the past, Prime Minister Narendra Modi said on Wednesday at the Confederation of Indian Industry’s annual meeting.
The retrospective tax, introduced in 2012, allowed the government to ask companies to pay taxes on mergers and acquisitions that happened before May 28 that year. The tax has been at the centre of disputes between the Indian government and firms like Vodafone and Cairn Energy. Both firms had won international arbitrations against the levy of retrospective taxes on them.
On August 5, the Centre proposed scrapping the controversial tax law. To be eligible, companies have to withdraw all pending cases against the government and give an undertaking that no damage claims would be filed by the firms who have been levied the tax.
“It has been great to see feedback and appreciation from industry in this regard,” Modi said in his virtual address. “This will increase trust between the government and the industry.”
The Congress government pushed the retrospective tax law through in 2012. The National Democratic Alliance, which was in the Opposition at the time, had described it as “tax terrorism” and late former Finance Minister Arun Jaitley had promised to scrap it.
At the event, the prime minister also said that the Indian economy was picking up pace again amid the coronavirus crisis. “Reforms in the labour code, significant reforms in trade laws and opening up of various sectors has led to India receiving record foreign direct investment,” he added.
Modi said his government has taken “bold decisions” and reforms were being undertaken during the pandemic too. “The government is doing reforms not out of compulsion but out of conviction,” he continued.