In a significant relief to foreign investors, the Central Board of Direct Taxes has put in abeyance a recent circular clarifying the indirect transfer provisions, which had led to retrospective tax cases like that of Vodafone.
An official statement from CBDT said the matter is now under consideration.
In representations against the circular issued on December 21, 2016, FPIs, FIIs , VCFs and other stakeholders had said that it does not address the issue of possible multiple taxation of the same income.
“Pending a decision in the matter, the operation of the above mentioned circular is kept in abeyance for the time being,” the CBDT statement said.
The circular had listed 19 instances when indirect tax provisions would come into play. The CBDT had set a threshold of ₹10 crore for value of assets or having at least 50 per cent of the business in India for the trigger of indirect transfer provisions to come into effect and attract tax.
FPIs were keen that the indirect transfer provision trigger should kick in at level of ₹100 crore, as they felt ₹ 10 crore was too low a sum. Secondly, the PE investors were anxious that in the case of foreign funds, the aspect of multiple taxation (double or triple taxation) was not addressed through the circular.