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'Misadventure' of retrospective taxation will be costly: FM

business Updated: Apr 18, 2015 15:15 IST

Ruling out the use of retrospective taxation by the present administration, Finance Minister Arun Jaitley has said that a permanent law in this regard is not possible and the cost would be "too heavy" if any future government indulges in such a "misadventure".

"As far as retrospective taxation is concerned, I think India's experience of the 2011 law has been very adverse, and therefore if any government did indulge in that misadventure ever in the future, the cost involved will be too heavy," Jaitley said.

He made the remarks while responding to a question on retrospective taxation system, an issue of concern for the American businesses.

"What would you say to an investor who says, 'I can trust you, Mr Jaitley, I can trust this government, but as long as that law remains on the books, how can I be sure that in seven years, or in eight years, or in 10 years, or 12, it is not misused by another government that does not share your intentions?" Jaitley was asked.

"I can't override parliamentary sovereignty. I can't bring a law that says Indian Parliament loses its right to ever enact a law retrospectively, even if I did that it would be illegal, every legislature has that power," Jaitley said in his reply.
"So any future parliament, or future government would have that power, but we've been doing our little bit in restating and re-emphasising that it was not a sensible decision to do so, and therefore I think the dangers of that retrospective legislation, and the context of which it was brought has been driven home," he said.

"Baring that one case which is pending under that law, or another case which has now arisen, I think most of the issues, we've already put them to rest, as far as retrospective legislation is concerned," he added.

In his address to Peterson Institute for International Economics on Thursday, Jaitley had said that he is "acutely aware" that there are concerns about retrospective taxation, tax harassment and arbitrariness in tax administration.

Jaitley had also highlighted that the government did not contest high court orders that went in favour of Vodafone and Shell which he said reflected the government's commitment to not being adversarial.