Swiss' withdrawal of MFN clause shouldn't have an impact on India's EFTA trade deal: Commerce Secretary

Swiss' withdrawal of MFN clause shouldn't have an impact on India's EFTA trade deal: Commerce Secretary

Swiss' withdrawal of MFN clause should not have an impact on India's European Free Trade Association (EFTA) trade deal, said Commerce Secretary Sunil Barthwal on December 16.

UK wants negotiations to start in January, and we have received an invite for our delegation to go there for talks on the FTA, said Barthwal.

The Swiss government's withdrawal of the most favoured nation (MFN) clause in the Double Taxation Avoidance Agreement (DTAA) with India will raise costs for Indian firms operating in Switzerland, particularly for those in financial services, pharmaceuticals, and IT, according to a brief by the think-tank Global Trade Research Initiative.

Switzerland's decision follows an Indian Supreme Court ruling in the Nestlé case back in October 2023, which clarified India’s interpretation around the MFN clause.

On October 19, 2023, the Indian Supreme Court ruled in the Nestlé case that MFN benefits could not be automatically applied to the India-Switzerland treaty unless explicitly notified under Section 90 of the Indian Income Tax Act.

The top court interpreted that the MFN clause applied only to OECD member countries as of 1994, the year the treaty was signed. This excluded subsequently added OECD members, such as Colombia and Lithuania, from the scope of the MFN clause.

The ambitious trade pact, signed in March between India and the European bloc comprising Norway, Switzerland, Iceland, and Liechtenstein, aims at expanding trade across a range of areas, including pharmaceuticals, manufacturing, new technologies and machinery.

Under the mega trade deal, the four European countries are looking at making an investment of $100 billion in India over the next 15 years. Each of the signatory countries will have to ratify the pact for its roll out.