Lahiri panel invites industry to discuss tax issues

A committee set up by the finance ministry to address industry's tax concerns has invited trade and industry for talks on the issue. Experts, however, say Finance Minister Arun Jaitley should have in his reply to a debate on the Finance Bill 2015 provided clarity on minimum alternate tax (MAT) notices to foreign institutional investors (FIIs) for past cases.

The committee, headed by former chief economic advisor Ashok Lahiri, was constituted in November last year. On Friday, the finance ministry brought out a release, saying the panel was inviting associations, federations and stakeholders representing trade and industry to present their views and suggestions on issues that required clarity in tax laws. The release said the committee could be reached at highlevelcommittee@gmail.com.

Experts say though Jaitley's announcement of MAT exemption on certain incomes of foreign firms provided relief, the government should have clarified on tax treaty benefits for past dues. PricewaterhouseCoopers partner (tax and regulatory services) Suresh Swamy said, "The finance minister could have clarified that FPIs (foreign portfolio investors) with treaty benefits would be exempt from paying MAT for the past year. That would have given more confidence to foreign investors."

He said it was possible there would be clarity on past tax notices after six months, when the Supreme Court decides on a case related to Mauritius-based Castleton Investment Ltd.

Sunil Kapadia, EY leader (business tax), said foreign investors sought certainty and clarity in taxation matters. "The clarification does not state what happens for taxation during a past period. That remains a controversial area."

The issue had come to the fore last year, when the tax department started sending MAT notices to FIIs. These notices were based on a decision by the Authority for Advance Rulings, which directed Castleton to pay MAT in India on its book profits.

So far, the government has sent MAT notices for about Rs 602 crore to 68 foreign investors.

Concerns over previous such cases, which Jaitley termed "legacy issues", linger.

The finance ministry has said investors from countries with which India has double-taxation avoidance agreements will be "considered" for exemption. However, this will only be applicable to DTAAs that have specific exemption from capital gains.