Tax proposals clarificatory not substantive Mukherjee to Geithner

Seeking to address concerns over India's investment climate, finance minister Pranab Mukherjee assured US Treasury secretary Timothy Geithner that recent Indian tax proposals that had rattled foreign investors were "not substantive but clarificatory," according to an a government statement today.

Mukherjee, who met Geithner in Washington yesterday, downplayed the impact of proposals - included in budget legislation - parliament was expected to vote on in coming weeks allowing Indian tax authorities to impose taxes retrospectively on certain transactions involving foreign firms that dated back to 1962.

Mukherjee told Geithner that the changes "reiterated only the intent" of longstanding Indian income tax law granting no new powers for tax authorities, the statement said.

Many lawyers and tax experts had disputed that assessment, claiming that the tax proposals would amount to a major shift complicating mergers and other transactions between foreign entities in which an Indian asset changed hands.

According to the statement, Mukherjee also told Geithner that "tax cases which have already been assessed and finalised up to 1 April 2012, cannot be reopened.''

The budget legislation contained several proposals that were a cause for concern among foreign investors. The treasury secretary raised concerns regarding the proposed changes and their impact on the investment climate in India.