Between 2012 and 2020, the Indian government attempted to retroactively tax 17 foreign multinational companies.
Retroactive taxation is a thing of the past in India, as the country’s finance minister introduced Taxation Laws (Amendment) Bill 2021 to the Indian parliament on August 5. The new amendment withdraws tax demands made following a 2012 amendment that allowed retrospective taxation on the transfer of ownership of Indian assets by foreign companies.
The now ruling Bharatiya Janata Party (BJP) had publicly opposed the 2012 amendment when it was in the opposition, but was slow to act to nullify the law when it came to power in 2014.
Between 2012 and 2020, the Indian government attempted to retroactively tax 17 foreign multinational companies. In May, Cairn Energy won against the Indian tax authorities at the Permanent Court of Arbitration and took the unprecedented step of seizing overseas assets belonging to the Indian government to recover taxes that it had been forced to pay.
Cairn’s win came after years of battling the Indian government in Indian courts and international tribunals. The government accused Cairn of avoiding taxes on a 2006 reorganization of its Indian subsidiaries and seized its nearly 10% residual shareholding in erstwhile Cairn India. A further refund is due to Cairn in an unrelated matter in which the income tax department seized assets. The total estimated refund is close to $1.4 billion. Cairn’s stock jumped 26% in London trading on August 6, after the new amendment to the tax laws was announced.
Some other cases of retroactive taxation before Indian courts and international tribunals that now stand resolved include Vedanta Resources’ purchase of a controlling stake in Sesa Goa, Mitsui & Co’s acquisition of an Indian company in 2007, SABMiller’s acquisition of Foster’s India, AT&T’s sale of Idea Cellular India, and Sanofi Pasteur Holdings’ acquisition of Shanta Biotech. The transaction that triggered the entire saga in 2012 was the sale of Hong Kong–based Hutchinson Whampoa’s Indian telecom assets to Vodafone.