Retro tax law gets Presidential assent
GS Paper - 3 (Economy)
The taxation laws (amendment) Act, 2021 received the assent of the President on 13 August 2021, the law ministry said in a notification, this scrapping the retrospective taxation clause in income tax law. The bill which has now become a law amends the Finance Act, 2012, and the Income Tax Act, 1961, nullifying demands raised on transactions prior to 28 May 2012. Tax the indirect transfer of Indian assets will be applied prospectively from this date.
- The law provides a framework for resolving international arbitration cases that the government has lost, namely those filed by Vodafone Group Plc and Cairn Energy and 15 others stemming from the retrospective tax law.
- Cairn Energy, Vodafone and about half a dozen of the companies are learnt to have reached out to the government for settling lawsuits or legal proceedings ongoing in various fora. Some have sought clarity on refund amounts and the details of the new law.
- As per the law, the government will withdraw all tax demands levied retrospectively and also refund taxes collected and settle cases if the companies withdraw challenges filed in all legal forums.
- The government has collected Rs 8,089 crore in taxes in four of them, including Rs 7,880 crore from Cairn, which will be refunded. No interest will be paid on the taxes refunded.
- The government will now issue rules and procedures for companies to settle their litigations.