India should do away with retrospective tax as it dents investor sentiment across the world in “a big way”, former Niti Aayog CEO Amitabh Kant told Moneycontrol in an interview, batting for policy stability.
“We need policy stability – the tax policy has to be set right,” said Kant, who is now a senior adviser with Canadian investment firm Fairfax Financial Holdings. The world must know India welcomes businesses and investors, he said.
“The Tiger Global case has impacted sentiments (of investors),” Kant said, stressing the retrospective tax issue needs to be done away with. “As a country, we need to do this as a mission,” he added
In January, the Supreme Court ruled that the capital gains generated by US Investment firm Tiger Global from its $1.6 billion stake sale in Flipkart to Walmart in 2018 were taxable in India.
The court said authorities proved that the transactions in the “instant case are impermissible tax-avoidance arrangements”, and the evidence prima-facie establishes that they “do not qualify as lawful”.
The ruling gave a boost to tax authorities, allowing them to probe past transactions that are solely undertaken to avail tax benefits, Moneycontrol reported earlier.
According to Kant, India needs to attract foreign capital as domestic savings are not adequate to push up the investment rate to 40 percent of the GDP.
“At present, the investment-to-GDP ratio is 30 percent… a 40 percent rate is need to make India grow at 9 percent for the next three decades,” he said.
“Attracting FDI needs tax stability. Advance rulings are taking a long time — a time limit of 60 days should be set.”
Advance rulings are legally-binding decisions on specific transactions, which are yet to be taken by businesses. This ensures that the tax interpretation by businesses of any transaction doesn’t face scrutiny later.
On India’s relationship with China, Kant said both countries need to work together in some areas. “India needs to partner with China, so that it does component manufacturing… machinery manufacturing…and produces several critical components such as batteries and solar items,” he said.
But India has to ensure China doesn’t weaponise these areas. China has mastered the art of weaponising technology, which is not good for the world.”
