Wooing investors with promise of an easier business environment and stable tax regime, Prime Minister Narendra Modi on Sunday said retrospective taxation has been made a thing of the past but he is “not able to do anything” on two cases inherited from the previous Government as they are “sub-judice”.
Modi also held wide-ranging talks with Saudi King Salman bin Abdulaziz on ways to expand strategic cooperation in a range of areas, including trade, investment and counter-terrorism. Besides, the two nations on Sunday decided to ramp up their counter-terrorism cooperation as they asked all countries to dismantle terror infrastructures “where they happen to exist” and reject the use of terrorism against other countries, seen as an oblique reference to Pakistan.
A joint statement issued after the talks between Modi and King Salman, said, “They called on all states to reject the use of terrorism against other countries; dismantle terrorism infrastructures where they happen to exist and to cut off any kind of support and financing to the terrorists operating and perpetrating terrorism from their territories against other states; and bring perpetrators of acts of terrorism to justice.”
Inviting Saudi businesses to come and invest in India’s defence, energy, railway, health and agriculture sectors, Modi also said that a common indirect taxation regime in form of GST (Goods and Services Tax) was “about to happen”. He, however, refrained from giving any specific timeframe.
Addressing a select group of Saudi and Indian business leaders on the last day of his two-day visit to Saudi Arabia, Modi said his Government has opened up many sectors to foreign investment and India stands out as a “beacon of hope” amidst global economic slowdown. He further said his Government was trying to strengthen the banking network in India by freeing them from non-performing assets (NPAs) of state-run electricity companies whose liabilities had gone up significantly.
Modi said India has taken major policy initiatives to create favourable environment for investors besides removing administrative bottlenecks. In this regard, he said the World Bank has placed India on the 12th position in the list of countries that had ensured ease of doing business. “Today, the world is facing a very deep economic crisis and in this situation, India is a beacon of hope. Whether it is World Bank, IMF or credit rating agencies, all of them consider India one of the fastest growing economies,” he said.
On roll out of the much-delayed GST, Modi said, “GST will happen. I cannot give a timeframe, but it will happen. It was our commitment, and it is about to happen.”
To a question on retrospective tax, Modi said it will never be brought back again. He said two cases were “sub-judice” and it would not be proper for him to comment further. “As far as retrospective tax is concerned, it is a thing of the past. We have repeatedly said this in Parliament and I am repeating here again today. There were two incidents that took place under the last Government. These are sub-judice. So, I am not being able to do anything on them. In one of the cases, positive outcome has come. Retrospective tax does not exist in India anymore. It has become a thing of the past. It won’t come,” he said.
Although the PM did not specifically name the pending cases, the major retrospective tax disputes include those involving Vodafone and Cairn. “I think in international relations, the taxation system should be predictable. If somebody wants to come (to India) after 10 years, he should know India’s tax structure is like this. That’s why we are working on a long-term tax system and we are implementing and I do not think there will be any problem in that,” Modi said.
A Saudi businessman had asked Modi about retrospective tax regime, GST, banking system and some other issues and wondered whether Modi will be able to address their concerns. Incidentally, Cairn Energy CEO Simon Thomson told PTI in an interview in london today that international investors want the Modi government to walk the talk on resolving retrospective tax issues and send a clear signal that things are changing under the new dispensation.
Cairn, which gave India its biggest onland oil discovery that now accounts for a fifth of the country’s oil production, will press ahead with the arbitration challenging use of a legislation to tax internal business reorganisation with retrospective effect and will seek $1 billion in damages, he further said.
Eyeing billions of dollars of investment from Saudi Arabia, which is setting up a USD 2 trillion public investment fund, Modi invited top CEOs to invest in defence, energy, railway, health and agriculture sectors in India. Holding that there was huge opportunity to ramp up trade ties, he said time has come to move from ‘buyer-seller relationship’ to chart a new path of growth and development which will benefit people of both the countries.
“We have to look beyond the buyer-seller relationship, because that will be an obstacle in the path of progress,” he said at the interaction organised by the Council of Saudi Chambers.
The two countries also called on states to cut off any kind of support and financing to terrorists operating and perpetrating terrorism from their territories against other states and bring perpetrators of acts of terrorism to justice. The pacts signed included one on cooperation in the exchange of intelligence related to money laundering, terror financing and related crimes and another relating to recruitment of Indian workers in Saudi Arabia, home to around three million Indian workers.