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Removal of retro tax will send positive signal to foreign investors

This change in retro tax law will reflect well on the govt's efforts to improve the ease of doing business environment

Madan Sabnavis, chief economist, CARE Ratings (Photo: PHOTO CREDIT: Kamlesh Pednekar)
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Madan Sabnavis
The removal of retrospective taxation for deals reckoned prior to 2012 is a very progressive step taken by the government. This, ostensibly, comes on the back of the litigation that is on in the International Arbitration Tribunal relating to Cairn Energy. But this has been a legacy issue with successive Indian governments where retrospective taxation was an effective way of garnering revenue. The indication given by the government alongside is that there could be refunds given to the companies without interest. 

Retrospective actions are always retrogressive, and this is a correction required in the Indian tax system. While Cairn and Vodafone

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