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Business News/ Politics / Policy/  Ravi Shankar Prasad promises stable tax regime to investors
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Ravi Shankar Prasad promises stable tax regime to investors

Prasad says the fiscal regime, policy regime, taxation regime must be very evident because India needs investment

Ravi Shankar Prasad took charge as law minister on Tuesday morning. Photo: PTIPremium
Ravi Shankar Prasad took charge as law minister on Tuesday morning. Photo: PTI

New Delhi: Law and communications minister Ravi Shankar Prasad took charge of his portfolios on Tuesday by promising a transparent and stable tax regime to investors, and expressing his reservations about retrospective taxation.

The new minister’s remarks come in the context of a Rs20,000 crore dispute between the government and Vodafone Group Plc that arose from a change in the tax law introduced with retrospective effect.

“The larger view is that retrospectivity is avoided to the maximum. The fiscal regime, the policy regime, taxation regime must be very evident because India needs investment," Prasad told reporters after taking charge of the law ministry.

The tax department and Vodafone have been locked in a dispute since 2007 over the telecom company’s $11 billion acquisition of Hutchison Essar Ltd, now known as Vodafone India Ltd.

The Indian government is facing international arbitration proceedings by Vodafone, which won a favourable verdict in 2012 from the Supreme Court, following which Parliament passed a retrospective amendment to enable the tax demand to stick.

On Vodafone’s arbitration notice, Prasad said: “We will look into it. Our manifesto has been very specific that we want a stable regime where those who invest in India may not have to face uncertainty."

India’s telecom industry has recently been plagued by fallout from a scandal over alleged irregularities in the 2008 allocation of 2G spectrum which the government auditor estimated had caused the exchequer a notional loss of Rs1.76 trillion.

In 2012, the Supreme Court cancelled 123 2G spectrum licences granted by the government, declaring the process illegal.

“I am aware of the problems in the telecom sector and my first priority is to set things right. The telecom sector has been in the news for many of the wrong reasons," Prasad said.

“There will two areas of focus that have to be fixed immediately—quality of service to the consumer and building investor confidence. There is 100% FDI (foreign direct investment) in the sector and this investment in the sector must be quickened under a transparent stable regime," he added.

DoT officials gave the minister a two-hour presentation on the various issues that need to be looked into by the new government.

The Associated Chambers of Commerce and Industry of India submitted a paper suggesting a four-pronged telecom strategy to the new telecom minister, to reinvigorate the telecommunications sector by reducing regulatory costs, auctioning available spectrum, extending benefits of infrastructure status to telecom and providing an impetus to domestic manufacturing.

“The incoming telecom minister is in favour of transparent, clear and stable regulatory and legal regime for telecom industry in order to remove the uncertainty and policy paralysis masking the telecom sector," said Hemant Joshi, partner at Deloitte Haskins & Sells said.

Joshi said India also needs a relaxed mergers and acquisitions (M&A) policy to help in consolidation of what he called a hyper-competitive telecom industry.

PTI contributed to this story.

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Published: 27 May 2014, 06:55 PM IST
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