The Mauritius Global Business Industry wants the existing double taxation avoidance agreement (DTAA) between India and Mauritius to remain in the current form as it could continue to enhance foreign direct investment (FDI) and other investment inflows into India.
India and Mauritius are working towards preferential trade agreement (PTA) and a comprehensive economic cooperation and partnership agreement (CECPA). Representatives of the Mauritius Global Business Industry, which is a federation of offshore management companies, banks, corporate lawyers and accountants, told Business Line here that the Indian tax revenue loss was not a valid argument as the benefits outweigh the tax foregone.
It was also pointed out that 19 of the 70 DTAAs signed by India give the taxing rights for capital gains on shares to the country of residence.
"The objective of DTAA goes well beyond revenue maximisation.
Besides avoidance of double taxation, the agreement also aims at encouraging trade and investment. Mauritius is a high quality jurisdiction that is well regulated and not a tax haven," Mr Uday K. Gujadhur, Chief Executive of a company registered with the Financial Services Commission, Mauritius, said.
Mr Couldip Basanta Lala, a director of another financial services company, said that the argument of round tripping was a fallacy as the FSC procedures pre-empt it.
He said that companies investing in India are required to provide confirmation to FSC that India-sourced funds from resident Indians would not be accepted without prior written approval of Indian regulatory body.
Moreover, management companies are required to ensure that no shares are offered or issued to Indian residents against India-sourced funds without prior written approval of Indian regulatory body.