India is likely to plug a loophole by which firms used the Mauritius route to buy and sell shares here without paying capital gains on tax.
Under the ongoing renegotiation of the Indo-Mauritius Direct Tax Avoidance Agreement, India is ready to give tax-free status, normally given to all Mauritius-registered firms, only to those companies who can show two things —they are genuine residents of the island nation and do not earn most of their revenues in India (shell firms registered in Mauritius).
Mauritius, however, has raised a number of procedural issues, which are yet to be sorted out. Tax authorities in India had hoped to finalise the deal by now but say more work was needed.
“We believe we can find a mutually satisfactory solution and a win-win package that would address concern about alleged misuse,” Mauritius Prime Minister Navinchandra Ramgoolam said here today at a meeting with the Indian business chambers.
“We also do not want to have roundtripping and money laundering,” he added.
Politically, it is important for the Congress-led government to go forward with the renegotiations to scotch the Opposition’s allegation that it is soft on black money.