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Govt uncertain on FDI inflow from Mauritius

BS Economy Bureau

The government has told Parliament that the termination of the Double Taxation Avoidance Agreement with Mauritius will affect the flow of foreign direct investment into the country.

But, it has also said it still does not have the information on whether a large portion of FDI comes to the country from Mauritius.

In a written reply to a question in the Rajya Sabha, the Minister of State for Finance Gingee Ramachandran said the objective of the Double Taxation Avoidance Agreement was to give a fillip to trade and investment between India and Mauritius.

Mauritius' finance minister, during his recent visit to India, had discussed with Finance Mminister Yashwant Sinha various moves to ensure better operation of the treaty.

The minister had told reporters that there was no question of abrogating or even reviewing the treaty and had added that India had benefitted a lot from it.

As per the latest monthly data of the secretariat for industrial assistance under the department of industrial promotion and policy, Mauritius accounts for the largest percentage of FDI flows into India.

But, the other Minister of State for Ffinance, Balasaheb Vikhe Patil, said on Tuesday that the information on FDI flows from Mauritius would have to be collected.

The government has also said that the amount of tax payable by an assessee under the treaty depends upon the net profit accruing at the end of an accounting year. Accordingly, the benefits available to the Mauritius-based companies in terms of their reduced tax liability are not a case of tax evasion.

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