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Govt bid to soothe investors on Mauritius tax treaty

NEW DELHI: Amidst panic in stock markets over reports of bringing Mauritius inflows under the tax net, the Central Government on Monday sought to calm the market sentiment stating it ‘cannot impose arbitrarily' capital gains levy on such investments.

“How can you do that? There has to be some agreement on that. Right now, it is not there in the agreement. You cannot impose it arbitrarily,” Finance Secretary Sunil Mitra said.

He said the bilateral convention on the Double Taxation Avoidance Agreement (DTAA) was binding on two countries, “until both sides agree to change it.'' However, he said discussions were likely to resume on re-negotiation of the three-decade old DTAA in July or August.

“We have suggested dates in July and August. It will depend on their (Mauritius) convenience,” he said. The treaty has been used for routing third country investment — both FDI and FIIs — into India for availing of tax exemptions.

Asked to comment on the market fall, Mr. Mitra said, “That is up to the market. What can I do.”

When asked whether the contentious issues of capital gains tax would be re-negotiated, Mr. Mitra said, “What is this capital gains issue? We have a large agenda for re-negotiations. It is a bilateral negotiation. It has to be agreed by both sides.'' Under the present treaty, only Mauritius has the right to tax capital gains on investment which is routed through it to India. But it does not levy any tax as per its domestic policies giving advantage to investors. — PTI

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