‘Investors may lose confidence in India’

The retrospective amendment in Income Tax Act, as proposed in the Union Budget 2012-13, would dent confidence of foreign companies investing in India, a group of industrialists and experts opined on Saturday.

"This mentality of retrospective amendments to tax Vodafone is a concern for all, as it will erode confidence of foreign investors in India," Pankaj Patel, CMD of Zydus Cadila Healthcare, said at a session on 'Budget & I', organised by FICCI and KPMG.

Pradeep Udhas, head, IT/BPO sector, KPMG India, echoed the same thing saying that such amendments would make doing business in India harder for foreign companies.
"This is akin to changing the rules after a game is over," he commented.

Jayesh Buch, resident director of Essar Group, said that the government was trying to superimpose its decisions on the judiciary, while Atul Chokshi, director of Kunvarji Group, said that the move would erode investors' confidence.

Param Shah, head of FICCI Gujarat State Council said that any policy changes should always be forward looking and not with retrospective effect as it hurts investment climate and business strategies for investors.

On Friday, the government introduced a retrospective clarification to Income Tax Act, virtually amending the law to ensure that cross-border transactions such as the $11 billion Vodafone-Hutchison deal of 2007 become taxable. The Supreme Court had earlier ruled that the deal was not taxable in India.

The experts also expressed concern over wide powers given to assessing authorities, saying they could be misused. They also criticised the Centre for the flip flop over Foreign Direct Investment (FDI).