Retro tax scrapping revived foreign interest in India's privatisation plan

 The government's decision to nullify retrospective taxation provisions has brought a fresh lease of life to its strategic disinvestment plan with growing overseas investor interest

The government's decision to nullify retrospective taxation provisions has brought a fresh lease of life to its strategic disinvestment plan with growing overseas investor interest in picking up management control of public sector undertakings put on the block for privatization.

Government sources said that they have received enquiries from foreign multinational corporations about participation in its strategic disinvestment plan and the pace has increased post the Centre's decision to amend retrospective taxation provisions in the Income-tax Act, bringing about certainty on taxation regulations and improving the country's ranking several notches on ease of doing business index.

Accordingly, the strategic disinvestment proposals of companies Ferro Scrap Nigam Limited (FSNL), Rashtriya Ispat Nigam Ltd, Container Corporation, IDBI Bank Ltd., Neelanchal Ispat Nigam ltd may get extensions if more time is required to bring a larger number of overseas investor participation. Also, the government is seeing the increased interest of foreign investors in the proposed initial public offer of Life Insurance Corporation (LIC) that is like later this year.

"The government's move (on scrapping retrospective taxation proposals) would also build the confidence of foreign investors to attract new investments that are crucial for reviving economic growth," said Vipul Jhaveri, Managing Partner-Tax, Deloitte India.

"This amendment (retrospective taxation) tainted India's image as an investment destination. The new changes will not only end prolonged litigation in numerous cases but will also uplift India's image internationally as a fair and equitable taxing nation, said Mukul Bagla, Chair, Direct Tax Committee, PHDCCI.