Nath seeks PM's help on Singapore trade agreement

Prime Minister Manmohan Singh's intervention has been sought to resolve outstanding issues between India and Singapore under the comprehensive economic cooperation agreement (CECA), regarding amendment of the double taxation avoidance agreement (DTAA) and granting of licenses to two Singapore banks.

Senior officials said Commerce and Industry Minister Kamal Nath had sought the Prime Minister's intervention on the matter, after the two issues were raised by Singapore during two review meetings on the CECA in April and early May.

Resolution of the two issues is hanging fire on the account of differences between the finance and commerce ministries.

Singapore wants amendment of the DTAA with India on grounds that conditions in the agreement are preventing investment from China and Japan to come to India under the CECA. It is seeking a DTAA at par with India's agreement with Mauritius.

India has added two eligibility conditions for capital gains tax exemption in the DTAA with Singapore.

These include listing on a recognised stock exchange and a total annual expenditure on operations in the residence state equal to or more than $2,00,000 or Rs 50,00,000 in the 24-month period from the date of the gains. The two conditions were added to prevent round tripping.

Making a case for the amendment of the DTAA, Nath in his letter to the Prime Minister has pointed out that India has offered a DTAA similar to Mauritius to other countries like the UAE and Cyprus.

Regarding banking, the minister said the issue of granting licences for opening branches by two Singapore banks "" United Overseas bank and DBS "" should not be linked to the granting of qualified full banking status being given to the State Bank of India by Singapore.

The minister pointed out that the SBI had not been given the QFB as it did not meet the prudential norms laid down in Singapore.

Investments from Singapore from 1992 until 2005 has touched $962.4 million. Annual investments during 2005 touched $321.4 million compared with $62.1 million in 2004.

Officials said the investments from Singapore could be significantly understated as many overseas investments into India are routed through Mauritius to take advantage of the DTAA.