Retro tax law abolished; Taxation (Amendments) Act 2021 wins Presidential assent

The Tax Laws (Amendment) Act 2021 received the President’s assent on August 13, the Justice Department said in a notification, removing the retrospective taxation clause from the Income Tax Act. income.

The bill which has now become law amends the Finance Act 2012 and the Income Tax Act 1961, reversing claims raised on transactions prior to May 28, 2012. The indirect transfer tax of Indian Assets will be applied prospectively from that date.

The Act provides a framework for resolving the international arbitration cases the government has lost, namely those filed by Vodafone Group Plc and Cairn Energy and 15 others arising from the Retrospective Tax Act.

Cairn Energy, Vodafone and around half a dozen companies have reportedly contacted the government to settle lawsuits or ongoing legal proceedings in various forums. Some have asked for clarification on reimbursement amounts and details of the new law.

In accordance with the law, the government will withdraw all tax claims collected retrospectively and also refund collected taxes and settle cases if companies withdraw challenges filed in all legal proceedings.

The government has collected Rs 8,089 crore in taxes from four of them, including Rs 7,880 crore from Cairn, which will be refunded. No interest will be paid on refunded taxes.

The government will now enact rules and procedures allowing companies to settle their disputes.

Prime Minister Narendra Modi said the decision to scrap back-taxation sends a clear message to investors that India is opening its doors to new possibilities, stressing that the government has the will to deliver on its promises.

India’s move shows commitment and policy coherence in addition to giving a clear message to all investors that it will deliver on its promises, Modi said.

Finance Minister Nirmala Sitharaman said during a discussion in parliament earlier this week that the decision to reverse the retrospective application of the law could not be taken sooner as Jaitley had said the government would wait until the two current affairs come to their logical conclusion. This happened in September 2020 (Vodafone) in one and December 2020 (Cairn) in the second.

These cases were studied in detail and as the budget session had to be cut short, the government presented the bill at the next opportunity, the finance minister said.