Government today sought comments from stakeholders on issues arising out of the changes in the tax treaty with Mauritius.
Earlier this week, the government had constituted a working group headed by a Joint Secretary-level officer to examine the "consequential issues" post amendments to the India-Mauritius Double Taxation Avoidance Convention.
"Stakeholders may send their comments and suggestion on the relevant issues electronically to dirfttr4-rev@gov.in by July 4, 2016, for consideration by the working group," a finance ministry statement said.
Besides Joint Secretary (FT&TR-II), CBDT, the working group would comprise of departmental officers and representatives of Sebi, custodians, brokerage firms and fund managers.
The Working Group will submit its report to the CBDT within three months after examining the relevant issues.
The government last month amended the 33-year old tax treaty. With this companies routing funds into India through the tropical island after March 31, 2017, will have to pay short-term capital gains tax at half the rate prevailing during the two-year transition period.
The levy is currently at 15 per cent. The full rate will kick in from April 1, 2019.
Between 2000 and 2015, a third of all foreign-direct investment into India, around USD 94 billion, came via Mauritius, according to the government data.
Foreign investors have historically bought shares in Indian companies via entities in countries like Mauritius and Singapore, with which India has a treaty to avoid double taxation. These countries either have no tax on capital gains or have rates lower than what they are in India.
It was expected that the changes will dampen investments into India as taxes would lower net returns for investors.
The government has now formed a group to study consequences arising out of the amendment.
New Delhi had since 2006 engaged with Mauritius to amend the treaty to check misuse by some investors who use a double-taxation avoidance pact between the two nations to escape taxes.
The treaty amendment would trigger a similar amendment in India's tax treaty with Singapore. Mauritius and Singapore accounted for USD 17 billion of the total USD 29.4 billion India received in FDI between April and December 2015.
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