"It's necessary that AAR has to be more consistent in rulings. Really it should have some sort of persuasive value. It (ruling) is some sort of guiding factors for those who wants to invest in India," Shah told a private news channel.
Shah's comment came after the government accepted recommendation of the high panel that minimum alternate tax (MAT) should not be imposed on FIIs retrospectively.
MAT has been levied on all companies except those in infrastructure and power sectors, since late 1980s.
Historically, foreign investors have not paid this tax because it was believed that only Indian companies were subject to it.
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In 2010, a tax tribunal ruled that MAT was not applicable to companies that don't have a permanent establishment in India.
In 2010, Mauritius-based investment firm Castleton Investment approached the Authority for Advance Rulings (AAR) to get confirmation that it was not required to pay MAT on a transaction it wanted to execute.
FIIs had argued that MAT is applicable only to domestic companies that had their base in India. By virtue of not being established in India, they should be "exempted".
FIIs also contend that there was inconsistency in the application of MAT as ever since it was introduced, FIIs were always exempted from it and hence, arbitrary application should be avoided.
After FIIs started getting notices for MAT payments, the stock market had reacted adversely on concerns that foreign investors may pull out in a big way.
The markets have been very volatile for the last few weeks and the Sensex today tanked 587 points to close at over 1-year low due to intense selling. In August FIIs sold shares worth record Rs 17,000 crore.