Bill to withdraw retro taxes delayed but welcome move, says Former Finance Secretary Arvind Mayaram

Former Finance Secretary, Arvind Mayaram on August 6 welcomed the Taxation Laws Amendment Bill.

"Much delayed but welcome move. I had convinced Arun Jaitley to include this as in his first budget speech in Jul ‘14. But there was stiff resistance from some newly appointed civil servants in powerful places. It had to wait seven years to fructify," Mayaram said in a tweet.

Mayaram's reaction comes a day after a Bill seeking to withdraw the retrospective tax law was introduced in the Lok Sabha.

Finance Minister Nirmala Sitharaman on August 5 tabled the Taxation Laws Amendment Bill in Lok Sabha, which seeks to withdraw the contentious retrospective tax more than nine years after it came into force.

In other words, the Bill seeks to withdraw the tax liability on gains arising from indirect transfer of Indian assets prior to May 28, 2012.

"The Bill proposes to amend the Income-tax Act, 1961 so as to provide that no tax demand shall be raised in future on the basis of the said retrospective amendment for any indirect transfer of Indian assets if the transaction was undertaken before 28th May, 2012," the government said.

The move will bring respite to companies like Cairn Energy and Vodafone, and is expected to end their long-standing legal dispute with the Indian government. Both, Cairn and Vodafone have won international arbitrations against levy of retrospective taxes on them.

The Bill also proposes to refund the amount paid in these cases without any interest thereon provided that the companies don’t go into arbitration and withdraw litigation pending before any forum.

To be eligible, the taxpayer would have to drop all pending cases against the government and promise not to make any demands for damages or costs.