Retrospective tax is a thing of past, says PM Narendra Modi; India-France sign 16 MoUs

Chandigarh: Seeking to address concerns of investors, Prime Minister Narendra Modi Sunday announced that the controversial Retrospective taxation is "a thing of the past" and this chapter will never be opened again as his government was putting in place a predictable tax regime.

He also announced that France would immediately start investing USD 1 billion in India annually which will be scaled up later. The two sides also signed 16 MoUs, including one for manufacture of helicopters in India.

Addressing business leaders of the two countries here in presence of French President Francois Hollande, Modi said his government wants to ensure that foreign investors are clear about tax systems that will prevail in India over the next 15 years.

"I am for stable governance and predictable taxation system. The government is taking various steps to ensure this stability. This government is known for stable and predictable tax regime," he said.

In this context he referred to the Retrospective tax imposed in 2012 through amendments in the Income Tax Act, a step which had led to an outcry and anxiety among the investors, particularly the foreign ones.

"Retrospective tax is a matter of past. That chapter will not be opened again. We are ensuring that neither this government nor the future governments can open this chapter," Modi told the India-France Business Summit.

"Whosoever makes investment in the country should know about the taxation system in the country over the next five years, 10 years, 15 years," he said.

The amendments in the I-T Act were brought to undo the Supreme Court judgement on British telecom major Vodafone's tax liability case which was to the tune of Rs 11,000 crore.

Hollande, who began his three-day India visit from here today, is accompanied by a large delegation of CEOs.

Modi, who also attended the bilateral CEOs forum along with Hollande, said the French President informed him that his country will immediately invest over USD 1 billion annually in India and scale up the amount later.

Hollande said France has full trust on growth of Indian economy and the two countries can work in areas like solar energy, technology transfer, transport, roads, space industry, health, agro, and nuclear energy.

He said the agreements signed should be implemented and turned into reality.

While promising stable regime and predictable tax system, Modi said over 400 French companies are already in India and more than 1,000 firms linked to them are also operational.

"A big investment of France is in India. There are many big activities that India and France are jointly doing. Their experience has been very positive," the Prime Minister said.

Describing India as a source of hope and confidence for the entire world as it is the "fastest growing economy", Modi invited French firms, especially in the defence sector to manufacture in India and take advantage of low costs involved.

"India wants to enter the field of defence manufacturing.... I assure French companies present here, especially in the field of defence manufacturing that we can do a lot in the area of defence manufacturing."

The CEOs forum discussed issues like defence, green economy, Smart Cities, infrastructure, transportation, water and financial sector.

Modi said France has decided to contribute to smart cities project in Nagpur, Puducherry and Chandigarh.

"We are working towards improving quality of life. We are working on good governance. These are the two initiatives that world is attracted towards," he said.

India has witnesssed 40 percent increase in foreign direct investments and established itself as an important destination for foreign capital, he said.

The Prime Minister said India's ranking in the 'Ease of Doing Business' has improved by 12 points in a short span of time after his government took over.

He said there are many opportunities to work on different fields between India and France. "It is like 'made for each other'. What you (France) have is our requirement and what you need is the market which we have," he said.

Seeking French assistance in improving infrastructure, rail network and innovation, Modi said, "Our development model requires the expertise of France. We have to move forward in infrastructure, rail, maritime, even waterways."

He said India also wants to play a significant role in a fight against global warming. "We want to reduce carbon foot print and move towards waterways," he said.

Modi said his government was in the process of switching over railways from diesel to electric mode and wants infrastructure to be set up at 50 stations for which French capability will be required.

Noting that Innovation was France's biggest strength, he said both India and France could work in this field. He talked about collaboration in the field of cyber security, defence by clubbing expertise and manufacturing capability of France with skill available in India.

"Defence is also a very important matter. And now, it is not only about the battlefield, cyber security is becoming vital. Sitting in a room, a class 12 student can also create problem anywhere... India has young talents in the field of IT. France has manufacturing capability," Modi said.

Modi also made a remark that France has an "umbilical" link with Chandigarh as the city was designed by French architect Le Corbusier.