PremiumFinance Ministry Nirmala Sitharaman said Finance Ministry officials talking to Cairn and Vodafone on closure of retrospective tax cases, refund and settlement. She added that there have been no interactions between her and the companies on the matter so far.
Talking to reporters on Monday, the Finance Minister said rules for scraping retrospective taxation will be framed soon. These rules will follow the law in this regard passed by Parliament during the Monsoon session.
Earlier this month, the Parliament passed a bill to amend the Income-tax Act to scrap all tax demands made using the 2012 retrospective tax legislation before May 28, 2012, the day it came into effect.
As per the bill, government will refund any payments made by companies under the retro tax to companies, provided they withdraw all legal challenges in the matter. However, no interest will be paid on the amount.
India introduced the retrospective taxation regulations in 2012 to raise tax demand against indirect transfer of Indian assets. The first company to face retrospective tax demands was Vodafone for buying Hutchison Telecommunication's stake in Hutchison Essar.
In 2014, the government once again exercised the 2012 amendment to raise tax demand against Cairn energy for an internal corporate restructuring carried out in 2006. Income Tax demands had been raised in 17 cases under retrospective tax law.
Arbitration under Bilateral Investment Protection Treaty with the United Kingdom and the Netherlands was invoked in four cases, two of which - filed by Cairn Energy and Vodafone - India lost.
While the government has no liability against Vodafone, it still has to pay $1.2 billion to Cairn as arbitration award. The UK based energy major had identified overseas Indian assets to confiscate in order to cover the award.
Prospective investors have been worried about India's retrospective taxation laws. By scrapping them, the central government expects foreign investment to return to the country.
During the press briefing earlier today, the Finance Minister ruled out any chances of excise duty cut on petrol and diesel, saying payments in lieu of past subsidised fuel price pose limitations. The transportation fuels have reached their all-time highs in the country over the past few months.
The previous Congress-led UPA government had issued bonds to state-owned oil companies to make up for the difference in the artificially suppressed retail selling price of fuel and the cost. These oil bonds and the interest thereon are being paid now.
“If I did not have the burden to service the oil bonds, I would have been in a position to reduce excise duty on fuel," the Finance Minister said.
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