The government has estimated the total tax refund to be made for settling disputes arising from the 2012 retrospective change in income tax law at ₹8,100 crore, Revenue Secretary Tarun Bajaj said in an interview.
Out of the total 17 tax disputes resulting from the 2012 tax law change that made the offshore sale of Indian businesses taxable in India, only four or five entails a refund requirement. Out of this, the biggest chunk of around ₹7,900 crore is estimated to go to Cairn Energy Plc., Bajaj confirmed. In the remaining cases, the refund requirement is small.
To an emailed query about the quantum of expected refunds, Cairn Energy did not directly offer a comment but pointed to its statement made on Thursday which assured of a further update in due course. Vodafone said in response to an emailed query that it has not paid anything regarding the retrospective tax case. “We are not commenting further,” said the statement. As per government estimates, the dues to Vodafone, may be around ₹45 crore.
The Narendra Modi administration, which is keen to enhance its credentials as an investor friendly country and boost capital flows to steer the economy out of the pandemic’s impact, expects the companies to come forward and settle the cases quickly.
“I am hopeful of settling these cases as early as possible,” said Bajaj.
The government believes the terms of the amicable settlement are agreeable to the other parties in the dispute. The optimism stems from the fact that businesses may be more willing to realise this opportunity to improve their bottom lines this fiscal than risk further prolonged and litigation, which involves uncertainty. The arbitration itself took several years in the case of the two British companies to reach a conclusion. A sudden boost to cash flow and the chance to put an end to the long-drawn litigation could encourage businesses to make use of the settlement option.
Prime Minister Narendra Modi on Friday made his intention of ensuring an investor-friendly atmosphere amply clear in his interaction with the heads of Indian Missions abroad. Modi stressed on the importance of stability in doing business during the interaction, said an official statement. The Prime Minister said the “decision taken by India to get rid of retrospective taxation shows our commitment, shows consistency in policies and gives a clear message to all the investors that India is not only opening the doors of new possibilities but the decisive Government of India, has the will to fulfill its promises,” said the statement.