Dr. Liam Fox, U.K. Secretary of State for International Trade calls on the Union Finance Minister Shri Arun Jaitley

Dr. Liam Fox, U.K. Secretary of State for International Trade calls on the Union Finance Minister Shri Arun Jaitley: Both the leaders call for forging deeper trade and investment arrangements between the two countries.


The Union Finance Minister Shri Arun Jaitley said that Government of India accords high priority to investment in infrastructure, manufacturing and service sectors. He said that Government has set-up National Infrastructure Invest Fund (NIIF) for attracting equity investments for development. He said that officials from both India and UK are jointly exploring creation of an India-UK sub-fund under the NIIF umbrella. The Finance Minister said that we look forward to implementation of this task expeditiously and positively in near future. The Finance Minister Shri Arun Jaitley was speaking when the UK Secretary of State for International Trade, Dr. Liam Fox called on him in his office in North Block here today.

The Finance Minister Shri Jaitley further said that India’s proposed termination of Bilaterally Investment Promotion Agreement (BIPA), as the Union Cabinet has approved a new model text for the Bilateral Investment Treaty (BIT). The new text of the BIT has already been shared with the UK Government in April, 2016. Besides it, the Finance Minister also raised the issue of proposed BREXIT implications on the Indian businesses and working professionals in U.K. The Finance Minister said that UK is among India’s major trading partner and despite the global economic slowdown and the Eurozone crisis, India-UK bilateral trade has been resilient. He also mentioned about new Free Trade Agreement (FTA) with UK depending on terms and conditions of UK’s withdrawal arrangement from the EU.

Earlier speaking on the occasion, Dr. Liam Fox, UK Secretary of State for International Trade said that UK is interested in forging deeper trade and investment arrangements with India. Dr. Fox announced his participation and the UK’s commitment to the Joint Economic and Trade Committee (JETCO) to be held on 7th November alongside the ‘India-UK TECH Summit’. Dr. Fox is currently on a three day visit to New Delhi and Mumbai from 28th to 30th August. This is the First visit by the new Secretary of State in his current role and his visit will boost UK-India bilateral commercial ties and mark India as a key strategic partner across trade, investment and defence.

****

Notification of Protocol for amendment of the Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains, and for the encouragement of mutual trade and investment between India and Mauritius

The Protocol for amendment of the Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains between India and Mauritius was signed by both countries on 10th May, 2016. After completion of internal procedures by both countries, the Protocol entered into force in India on 19th July, 2016 and has been notified in the Official Gazette on 11th August, 2016.

The Protocol provides for source-based taxation of capital gains arising from alienation of shares acquired on or after 1st April, 2017 in a company resident in India with effect from financial year 2017-18. Simultaneously, investments made before 1st April, 2017 have been grandfathered and will not be subject to capital gains taxation in India. Where such capital gains arise during the transition period from 1st April, 2017 to 31st March, 2019, the tax rate will be limited to 50% of the domestic tax rate of India. Taxation in India at full domestic tax rate will take place from financial year 2019-20 onwards.

The benefit of 50% reduction in tax rate during the transition period shall be subject to the Limitation of Benefits Article, whereby a resident of Mauritius (including a shell / conduit company) will not be entitled to benefit of 50% reduction in tax rate, if it fails the main purpose test and bonafide business test. A resident is deemed to be a shell / conduit company, if its total expenditure on operations in Mauritius is less than Rs. 2,700,000 (Mauritian Rupees 1,500,000) in the immediately preceding 12 months.

The Protocol further provides for source-based taxation of interest income of banks, whereby interest arising in India to Mauritian resident banks will be subject to withholding tax in India at the rate of 7.5% in respect of debt claims or loans made after 31st March, 2017. However, interest income of Mauritian resident banks in respect of debt-claims existing on or before 31st March, 2017 shall be exempt from tax in India as per existing provisions in the Convention.

The Protocol also provides for updating of the Exchange of Information Article as per the international standard, provision for assistance in collection of taxes, source-based taxation of other income, amongst other changes.

The Protocol will tackle treaty abuse and round tripping of funds attributed to the India-Mauritius treaty, curb revenue loss, prevent double non-taxation, streamline the flow of investment and stimulate the flow of exchange of information between the two Contracting Parties. It will improve transparency in tax matters and will help curb tax evasion and tax avoidance.

****

Ms. Penny Pritzker, U.S. Secretary of Commerce calls on the Union Finance Minister Shri Arun Jaitley: Both the leaders discussed the measures to increase the bilateral trade among the two countries.

The Union Finance Minster Shri Arun Jaitley said that many Indian States are growing at the rate of 10-11 per cent and the trade dialogue between the States and the US investors and companies can help in giving boost to the bilateral trade between India and US. He said that the Central Government has created a National Infrastructure Invest Fund (NIIF) in which various U.S. based insurance and pension funds, endowment funds can invest especially in infrastructure sector which has great potential in India. The Finance Minister was speaking when the United States Secretary of Commerce, Ms. Penny Pritzker and Director of the National Economic Council Mr. Jeffrey Zients called on him in his office in North Block today. Both the leaders discussed the issues relating to bilateral trade and measures to increase the trade between the two countries.

Speaking further, the Finance Minister Shri Jaitley said that the Constitution Amendment Bill relating to Goods and Service Tax has been passed by both the Houses of Parliament unanimously in the last Monsoon Session. He said that 8 States have already approved the GST Constitution Amendment Bill and hoped that the remaining States will follow suit and the desired number of State Ratifications can be achieved early next month. He also expressed India’s interest to increase bilateral trade between the two nations and said that most of the concerns between the two countries have been either resolved or narrowed down to a large extent. He said that CEOs of various Indian companies are in constant dialogue with their US counterparts for increased trade and investment among the two nations.

Earlier, the U.S. Secretary of Commerce, Ms Penny welcomed the approval of GST Bill and hoped that this will boost the economic activities in the country at large. She suggested that the trade dialogue by the State Chief Ministers with different US authorities can be given a structured shape in order to give impetus to the bilateral trade. She expressed hope that there is great potential to increase the bilateral trade among the two nations. She said that US wants to institutionalise the trade relations between the two countries to give it impetus.