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Tuesday 8 May 2012

Reforms Wheel Run Through as Pranab Surrenders to Corporate Lobbying and Hillary Clinton Manages the Rebel Mamata Banerjee!

Reforms Wheel Run Through as Pranab Surrenders to Corporate Lobbying and Hillary Clinton Manages the Rebel Mamata Banerjee!

Indian Holocaust My Father`s Life and Time - Eight HUNDRED THIRTY THREE

Palash Biswas
Reforms Wheel Run Through as Pranab Surrenders to Corporate Lobbying and Hillary Clinton Manages the Rebel Mamata Bannerjee! India delayed by a year the rollout of measures to crack down on tax evasion, mollifying overseas investors rattled by uncertainty over proposals that had spurred an exodus of funds and battered the rupee.It happened before US foreign Secretary reched Delhi.Pranab played an excellent coverup game to underplay the decision!Bowing to demands from within and outside Parliament, government today rolled back the one per cent excise duty levy on branded or unbranded precious metal jewellery sacrificing Rs 600 crore and deferred implementation of anti-tax avoidance rules by a year as a sop to foreign institutional investors.However, finance minister Pranab Mukherjee, even while standing firm on the on the Vodafone tax issue, addressed foreign investors' concerns saying the retrospective tax amendment will not be used to reopen cases where the assessment orders have been finalised. Corporate lobbying further intensified as India Inc on Monday expressed hope that the government would "relook" into the provisions of the General Anti-Avoidance Rules (GAAR), the implementation of which has been postponed by the government by one year. The deferment and some clarifications that the finance minister announced in Parliament should help restore the confidence of both foreign and domestic investors in India. Of particular interest to the investor is that even before GAAR guidelines are issued, the minister has given enough indications that safeguards would be built into the system to prevent misuse. Before the provisions are actually invoked aggrieved investors will have enough avenues to seek protection; besides, the onus of proving tax dodge will be on the tax authorities.

Moving the Finance Bill, 2012 for consideration in the Lok Sabha, he raised the threshold limit for tax collection at source (TCS) by sellers on cash purchases of jewellery to Rs 5 lakh from Rs 2 lakh.However, the threshold limit for TCS on cash purchase of bullion will be retained at Rs 2 lakh. Bullion will not include any coin or other articles weighing 10 gms or less.One of the most controversial tax proposals in recent times has finally been postponed. On Monday, finance minister Pranab Mukherjee told Parliament his government would delay the rollout of the general anti-avoidance rules or GAAR.

On the other hand,Prime Minister Manmohan Singh on Monday told U.S. Secretary of State Hillary Clinton that India was aligned with the international community on checking the spread of nuclear weapons but would be guided by its national interests on securing its energy supplies.India's stand on non-proliferation and approach to importing oil was reiterated during an 80-minute unstructured meeting between Ms. Clinton and Dr. Singh that was described by informed sources as "cordial'' during which "a lot of issues were discussed.''

The meeting preceded an address by Ms. Clinton in Kolkata where she dwelt on specific U.S. expectations from India in dealing with the Iranian nuclear issue. "The reason why India, China and Japan and European countries are being asked to lower their supplies is to keep the pressure on Iran," she said while commending Japan for doing so despite last year's tsunami and a shutdown of its nuclear programme.

The U.S. has agreed to treat West Bengal as a partner state for investment in the changed political situation, Chief Minister Mamata Banerjee said in Kolkata on Monday.

"As per partner state, they will invest in West Bengal which was not taking place due to the political situation in the past," Ms. Banerjee told reporters after a 52-minute meeting with U.S. Secretary of State Hillary Clinton.

She also said that the issue of FDI in retail did not come up during the meeting.

She said that the areas identified for U.S. investment were IT, software sector, manufacturing, deep sea port, tourism, health care and education.

"They will give full support for economic and business development," Mr. Banerjee said, adding that Chief Secretary Samar Ghosh and U.S. Ambassador Nancy Powell would coordinate and monitor the progress.

Describing her meeting with Ms. Clinton as "positive, constructive, creative and concrete", the chief minister said that Teesta water-sharing agreement and FDI in retail issues did not figure in the discussion.

"There were no talks about Teesta (water-sharing with Bangladesh). There were no talks on FDI in retail. No nuclear or strategic issues were discussed," Ms. Banerjee told reporters in reply to a volley of questions.

Ms. Clinton welcomed the political change in the state after 34 years and expressed her happiness at the implementation of programmes taken up.

"We discussed many issues. She congratulated us. Ms. Clinton appreciated our passion of work and implementation of programmes."

U.S. Secretary of State Hillary Clinton on Monday said that water-sharing issue between India and Bangladesh should be solved amicably.

"These are certainly on the list of things I would want to talk about," Ms. Clinton told an interactive session here when asked whether sharing of the Teesta waters with Bangladesh would be on her agenda of talks with West Bengal Chief Minister Mamata Banerjee.

Stating that the United States had no interest in how the water-sharing pact was arrived at, she said that it wanted the issue to be amicably resolved as "these will become hot issues, literally hot issues in the future."

Ms. Clinton said, "Water is an issue that will increasingly become contentious.

"The alternative will be perhaps a conflict which will lead to dislocation, refugee problems and destabilisation that we are seeing in places in North Africa. We have to work together," she said.

Sharing of Teesta waters has become a contentious issue between Bangladesh and India with West Bengal Chief Minister Mamata Banerjee expressing reservations over the quantum of water to be given to the eastern neighbour.

The West Bengal Chief Minister had opposed the amount of water that the central government had agreed to give to Bangladesh as part of the Teesta water pact.

Ms. Banerjee has also formed a committee to suggest the amount of water that West Bengal could give without affecting the interest of farmers.

U.S. Secretary of State Hillary Clinton held nearly an hour-long meeting with West Bengal Chief Minister Mamata Banerjee on Monday and are understood to have discussed various issues ranging from the Teesta water treaty to FDI in retail.

This was the first-ever visit by a U.S. secretary of state to Writers' Buildings to hold a meeting with a chief minister.

No official briefing on what transpired during the meeting has been held so far.

Ms. Clinton arrived with a large US delegation for the meeting with the Chief Minister who was waiting in the lounge in front of her office to greet her and after an exchange of pleasantries, shook hands and posed for a photo session.

The Chief Minister then took Ms. Clinton to a large portrait of Rabindranath Tagore, whose 150th birth anniversary falls tomorrow.

The meeting between Ms. Clinton and Ms. Banerjee, both listed among the 100 top influential people in world by Time magazine, took place at the conference room from 11:05 a.m. to 11:57 a.m., 12 minutes more than scheduled time.

Also present were US Ambassador Nancy Powell, US Assistant Secretary Robery Blake and US Consul General Dean Thompson.

Chief Secretary Samar Ghosh, Home Secretary Basudev Banerjee, besides Finance Minister Amit Mitra and Secretary to the Chief Minister Gautam Sanyal participated in the meeting.

US Secretary of State Hillary Clinton on Monday urged India to do "even more" to cut its purchases of oil from sanctions-hit Iran to keep pressure on that country to to prove its nuclear programme is peaceful.

Ms. Clinton, however, commended the steps taken by India so far in lowering purchases of Iranian oil.

"India is certainly working towards lowering purchases of Iranian oil. We commend the steps they have taken thus far. We hope they will do even more," she told a public event in Kolkata on the first leg of her visit to India that will also take her to Delhi.

Ms. Clinton's remarks came when she was asked why the U.S. wants India to reduce oil imports from Iran when India is not an oil producing nation.

The U.S.' top diplomat also said there was adequate oil supplies available from countries like Saudi Arabia.

Pressing India to further reduce oil imports from Iran tops the agenda of Ms. Clinton who flew into Kolkata on Sunday at the start of a three-day visit to India.

The U.S. has been urging India and other countries to slash oil imports from Iran aimed at stepping up pressure on Tehran to comply with international demands over its nuclear programme.

Ms. Clinton said it could be "devastating" for the world if Iran developed a nuclear bomb.

She said that Iran has been regularly flouting international obligations especially its insistance on nuclear proliferation.

"The international community feels that Iran has to be pressurized into changing its behavior, and it is this pressure that has convinced Iran to come back to the negotiating table," she said.

"We think that India as a country will understand the causes for trying to use the policy to resolve the difficult issue and it is certainly working towards lowering the purchase of Iranian oil," Ms. Clinton said elaborating on her remarks on what US expected India to do on the Iranian issue.

"We cannot accept that that they (India) have taken it that far. We hope that they will do even more. We believe there is adequate supply of oil in the market place as Saudi Arabia, Iran and other suppliers are putting oil," she said.

"We think this is India's role in the international community," she said.

Ms. Clinton said the international community has imposed sanctions Iran for its attempt to destabilise the region for developing nuclear weapons.

"We appreciate what India and other countries can do to help us. Arms race in the region is feared as Iran pursues its nuclear programme. We appreciate India's stand to help us maintain pressure on Iran," she said.

Ms. Clinton said India, China, Japan and other European countries are being asked to lower their supplies to keep pressure on Iran.

She said that imposition of sanctions on Iran had pressurised the country to come back to the negotiating table and there is unanimity amongst the members of the Security Council, EU and Germany to negotiate a resolution to the Iranian nuke issue.

U.S. Secretary of State Hillary Clinton on Monday said Pakistan has not done as much as the U.S. and India wanted it to do to fight terrorism.

"Pakistan has lost far more people than India and the US. 30,000 lives have been lost in Pakistan in terroist attacks. It is in their interest that Pakistan should deal with the problem of terrorism," Ms. Clinton told an interactive session in Kolkata.

"We want to disable al-Qaeda. We have made lots of progress. Many of their leaders are on the run. Some are in Pakistan. We want to go after them," she said.

In a reference to JuD chief Hafiz Saeed, Ms. Clinton said that the U.S. has announced a $10 million bounty on the man who masterminded the Mumbai attack.

"We are all aware that Pakistan has not done as much as the US and India wanted to fight terrorism," she said in reply to a question what was the next big target of the US after Laden.

But during her interaction with Dr. Singh, Ms. Clinton dwelt on the "broader regional and global implications'' if the U.S. pressure through sanctions on Iran did not force it to completely open up its nuclear programme for inspections. The Indian delegation was in a listening mode while Ms. Clinton spoke of attempts by the P5 + 1 grouping to engage with Iran and apprehensions among the neighbours about its recalcitrant behaviour.

The meeting did not see Ms. Clinton seeking a further reduction in Indian purchase of Iranian oil .

The two leaders also discussed how both nations could contribute to sustaining Afghanistan after the 2014 withdrawal of western forces.

Meanwhile Pranab` chances to become the Next President of India has brightened.The BJP may not have taken an official position on Pranab Mukherjee's candidature for Presidential poll, its leader Yashwant Sinha today applauded the Finance Minister in anticipation of his moving to the "big house".

A smiling Mukherjee watched as Sinha, followed by a few other members in the Lok Sabha, suggested that they were expecting him to become the next President.

"At the outset I wish to place my views with an apology. If the Finance Minister moves to the big house on the other side after this session, then he will not keep anything against me for whatever I am going to say today," Sinha said initiating debate on Finance Bill moved by Mukherjee.

"Sir, if I get any chance, then he will not reject me," he said.

As Sinha, himself a former Finance Minister, said Mukherjee perhaps won't be there to reply to certain suggestions made by the Parliamentary panel on Finance, the Finance Minister shot back: "Are you determined to remove me from the Finance Ministry?"

Ending his debate, Sinha said, "We wish you well personally. We wish you a very bright future. We wish that you will continue to serve this country, in whatever capacity, for many years to come."

B Mahtab (BJP) hoped to see Mukherjee during the next Budget session "walk down the Central Hall and address joint sitting."

Expressing similar sentiments, Hukum Dev Narain Yadav (BJP) said he wanted Mukherjee to address the joint sitting at the beginning of Budget session next year.

Jewellery traders all over the country had gone on a long strike in protest against the one per cent central excise on branded and unbranded jewellery and delegations had met Mukherjee and Congress president Sonia Gandhi demanding its withdrawal.The withdrawal of the 1% excise duty and some other changes in excise and customs duties would entail a revenue loss of Rs 600 crore, Central Board of Excise and Customs (CBEC) chairman S K Goel said.

In a significant relief to foreign banks, the government has exempted them from paying capital gains tax on conversion of branches in India into wholly owned subsidiaries.To facilitate low-cost foreign loan access to Indian companies, finance minister Pranab Mukherjee on Monday moved an amendment to the Finance Bill 2012, slashing withholding tax from 20% to 5% across the board for all businesses.

In order to encourage foreign banks to operate in India as subsidiaries, Finance Minister Pranab Mukherjee Monday said such move be tax neutral.

"The Reserve Bank of India is formulating a scheme for subsidiarisation of Indian branches of foreign banks to ring fence Indian capital and Indian operations from economic shocks external to the Indian economic scenario," Finance Minister said in the Lok Sabha.

"To support this effort, I propose to provide tax neutrality for such subsidiarisation," he said while initiating discussion on Finance Bill, 2012 in Lok Sabha.

Last year, RBI in its discussion paper supported subsidiary-led model for foreign banks operating in India, instead of the existing branch mode of expansion.

RBI had said incentives were necessary to promote the subsidiary route.

Among the incentives RBI had proposed are liberal branch expansions and allowing the wholly-owned subsidiaries (WOS) of foreign banks to raise rupee resources by issuing non-equity capital instruments in form of hybrid instruments and subordinate debt.

The current regulations allow foreign banks to raise resources only from their parent body or head office through Innovative Perpetual Debt Instruments.

India delayed by a year the rollout of measures to crack down on tax evasion, mollifying overseas investors rattled by uncertainty over proposals that had spurred an exodus of funds and battered the rupee.The postponement on the so-called general anti-avoidance rule (GAAR) is the latest in a string of delays and reversals by an embattled government that has struggled to seize the policy initiative.Investors breathed a sigh of relief, lifting the rupee and pushing stocks into positive territory after they had lost nearly 2 percent earlier in the day.The market had most feared the retrospective implementation of the provisions. This could have led to reopening of old tax returns of entities which have been investing in the Indian capital market. Now it is clear that there will be no reassessment where the assessment order has been already issued. This takes away the risk of getting fresh tax notices for incomes that most hedge funds had booked in earlier years and already repatriated to investors in their home countries.What the minister has done is remove doubts about India as an investment that arose after the change in the tax provisions were proposed in the budget. Like any other country India has the right to decide what sort of income will be taxed or not. The deferment of GAAR gives breathing space to foreign investors who have so far come here assuming a certain set of tax rules. They now have enough time to do tax planning and make up their mind whether they want to invest in India or not. There is a probability though that the long- term, serious investors who have been routing their investments through certain countries because of the tax advantages they gave would not leave India but stay here after restructuring their operation. In the process of helping the investor the government has helped itself. The Indian rupee, declining steadily for the past eight weeks, was a major headache for the government and the Reserve Bank of India. After the minister's statement, the rupee rebounded and closed at Rs 52.91 a dollar against Friday's Rs 53.47. India needs of foreign capital both as direct investment in our industries and companies but also into out stock markets. We have a huge current account deficit and capital inflows have been helping to maintain an overall balance. The capital flows were hit sharply in the recent past but should now see gain in momentum with in a short term and get normal in the medium term. Besides macroeconomic issues, lack of clarity on taxation issues is the biggest impediment to attracting the flows. This is true of all countries. Now with clarity on GAAR, the Indian market, which has been underperforming other emerging markets and unable to attract significant inflows at a time of high global liquidity, can hope to regain lost ground. A sudden turbulence in the Eurozone has once again taken high risks trades off the table, but surely when they resume after the political dust settles India will once again be on the investment radar of global investors.

The Finance Minister's opening remarks on the Finance Bill have faded any hopes that Vodafone may have had of the government deciding to step back and not make a law that taxes it for the 2007 Hutchison transaction. Sources close to Vodafone have told CNBC-TV18 that not only is the company not seeking a penalty and interest waiver, it may well decide to hasten the international arbitration process.

A penalty and interest waiver has the potential to halve the USD 5 billion tax bill the government has draw on the telecom major. Sources in the Finance Ministry had earlier said they could look at this option if Vodafone formally sought such a waiver.

On hastening the international arbitration process, sources close to Vodafone explain the passage of this retrospective tax law would leave no scope for reconciliation and would in fact frustrate any such attempts. In the notice served to the Indian government for its intention of international arbitration, Vodafone had provided a window for reconciliation.

Sources told CNBC-TV18, 'by passing this law, the government is making it clear it is not interested in any form of reconciliation. Therefore, what could be the purpose of waiting for six months? Vodafone would have no option but to quickly seek expropriation under the bilateral treaty between India and Netherlands.'
In the Hutchison transaction, the Vodafone investee company was based out of Netherlands.

Sources add Vodafone may also not attempt to challenge constitutional validity of this law. The only hope left is the FM's closing remarks on the debate tomorrow.

The Union Budget had included a statement that tax residency certificate will not be considered sufficient to evaluate if an entity is eligible for concessions under the DTAA. Mr Mukherjee is still silent on this, which means, that he has not altered his views on brass-plate companies that route money in to India. The only recourse left to such FIIs is to abandon this route.

The BSE benchmark Sensex reversed the day's steep losses to end higher by 82 points on brisk last hour buying after investors cheered Finance Minister Pranab Mukherjee deferring the controversial General Anti-Avoidance Rules (GAAR).

After GAAR and changes in the I-T Act that had spooked the investor community bringing down key indices to three-month low levels last week, the markets have now set all eyes on Parliament.

Moving the Finance Bill, 2012, which contains GAAR provisions, for consideration and passage in the Lok Sabha, Mukherjee deferred GAAR to 2013-14 and fixed the onus of proof from tax payer to the I-T Department that soothed the nerves of foreign investors.

Within minutes of government deferring GAAR, markets started recovering from the the steep losses it had suffered in the early trade in tune with global stocks. Global stocks took a severe knock after France and Greece poll results cast a shadow on eurozone's ability to overcome crisis.

The benchmark Sensex, which at one point of time during the day was down close to 320 points, dramatically reversed the fortunes to settle the day at 16,912.71, a rise of 81.63 points from its last close,

"Markets will now await initiation of the reforms process, which is necessary for the markets to sustain and move up from the current levels," said Kotak Securities Head (Fundamental Research) Dipen Shah.

The government's other steps, which soothed the nerves of investors, included halving the capital gains tax for private equity investors to 10 per cent and relaxing the norms for arrest of persons involved in violation of Customs Act. Investors were frightened by the GAAR provision that put the onus on investors to prove that arrangements were not at aimed at tax avoidance. Also, foreign investors feared GAAR rule could apply to holders of Participatory Notes (P-Notes), the instrument through which foreign entities not registered in India could invest in the stock markets, issued by FIIs.  The broad-based NSE Nifty also early logged a low of 5,017.80 before springing back to conclude at 5,114.15, a gain of 27.50 points.

"In the last hour of the trade markets recovered from the day's low as the announcement brought cheer among the investors," said Fairwealth Securities Head (Equity) Sharmila Joshi.

Rupee gains

Meanwhile the rupee, recouping from sharp early losses, gained an impressive 56 paise at 52.91/92 against dollar, to snap a four-day losing string as hopes of strong fund flows got a boost from the deferring the GAAR.

Treasury managers in banks said steps announced by RBI regarding FCNR and export credit also lifted the rupee sentiment. At the Interbank Foreign Exchange (Forex) market, the domestic unit opened weak at 53.63/64 and logged an intra-day low of 53.76 on early sharp fall in local equities due to negative global advices.

Moving in tandem with stocks, where late buying emerged after deferring of GAAR, the domestic unit started gaining, as exporters and some banks started selling dollars on hopes of more capital inflows in view of GAAR postponement. The local currency bounced back to a high of 52.85 before concluding at 52.91/92, a rise of 1.05 per cent. In the last four sessions, it had plunged by 0.93 paise, or 1.77 per cent.

Positive reaction

Reacting to the changes introduced in the Finance Bill, Ficci President R V Kanoria said that the industry body is happy its suggestions have been taken cognizance of and that there is a rethinking on GAAR. "I hope that they will also relook it and a more realistic GAAR will be introduced," he said.

Similarly, PwC India Joint Tax Leader Ketan Dalal said, "GAAR has been deferred by one year. There also seems to be an intended to shift the onus of proof from the tax payer to the tax department, which again is welcome."

"However, a fundamental issue that still needs to be addressed is the trigger of GAAR itself - the draft proposal contemplates the trigger 'where one of the main purposes is to obtain a tax benefit'. Given that 'tax benefit' is worded unreasonably, one hopes this issue will be addressed," he added.

Stock market is in a tizzy ever since Mr Pranab Mukherjee included GAAR in the Union Budget. Stock prices have refused to move higher with the Sensex moving in a tight band between 17,000 and 17,500 since then. Foreign institutional inflows that had totalled $8.4 billion till the Budget day, dried up in the following weeks. The saving grace here is that there were no outflows either.Foreign institutional investors have valid reason for being concerned about the imposition of GAAR. These rules would give the Income-Tax authorities the power to look in to companies that lack substance and those that are set up mainly for tax-avoidance. Structures used for round-tripping would also have come under the tax-men's lens once GAAR was implemented.

Now, it is no secret that most foreign institutional investors are routing their investments into Indian stock market through Mauritius. Many of them have formed shell companies that lack commercial substance, have no other commercial transactions and have been set up with the sole intention of making use of the double tax avoidance agreement (DTAA) that Indian Government has signed with Mauritius. Under this agreement investors pay capital gains tax in the country of domicile. Since Mauritius does not charge any capital gains tax on investments, these investors get off by evading CGT altogether.

Now that the Finance Minister has given FIIs one year to arrange their affairs, they can continue their operations without any fear till next April. Shell companies investing in India can wind up their operations by divesting their holding in Indian stocks in this period.

Genuine FIIs will have to brace up to the fact that they will now have to pay tax like other FIIs not routing their money through tax havens. The move will free Indian stock market of black money which is the prime motive of the Finance Ministry. Past data shows that while there can be temporary cessation in flows, it does not impact the FII inflow over the long-term.

However, Monday's changes to the finance bill do not appear to give any respite to Britain's Vodafone, which India wants to tax over its 2007 acquisition of Hong Kong-based Hutchison Whampoa's mobile operations in India.

"To provide more time to both the taxpayer and tax administration, to address all related issues, I propose to defer the applicability of GAAR provisions," Finance Minister Pranab Mukherjee told parliament on Monday.

He said a committee would submit its recommendations on GAAR by May 31. The rule will apply to income starting from the financial year that begins in April 2013.

Expectations for a delay had been building in recent days as investor disquiet sent the rupee skidding, exacerbating India's balance of payments shortfall. Wide current account and fiscal deficits mean India needs to bolster foreign investment.

The rupee is down 9 percent since the start of March, taking it close to a record low. In March and April, India saw net portfolio outflows of $540 million, compared with $13 billion in inflows in January-February.

"It's obviously a positive in the near-term," said Jonathan Cavenagh, FX strategist at Westpac in Singapore.

"Does it change the USD/INR trend? No would be my view. Twin deficits, elevated oil prices and cooling growth momentum (against a backdrop of high inflation) continue to create a poisonous environment for the currency," he said.

The GAAR proposal aims to target tax evaders, partly by stopping Indian companies and investors from "round-tripping", or routing investments through Mauritius and other tax havens.

However, foreign investors domiciled in Mauritius could also be exposed to short-term capital gains tax under the rule.


The vagueness of the original plan, which was unveiled as part of India's budget for the fiscal year beginning in April, caused uncertainty among foreign investors, putting an already weak government on the defensive.

Removing some of that uncertainty, Mukherjee said the burden of proving tax evasion would lie with the authorities rather than with overseas investors.

"I hope they're buying themselves a bit of time to make some amendments that make it clear," said David Cornell, managing director in Mumbai for British-based fund manager Ocean Dial Advisers, which manages about $100 million in Indian assets and is licensed in Mauritius.

"I don't have any issue paying tax, but I do have an issue about not being a level playing field. Funds investing via Singapore or via New York-listed instruments providing exposure to India will have an advantage. It hasn't been clearly thought through yet," he said.

Last month, Finance Ministry officials met top foreign institutional investors (FIIs), including Morgan Stanley, JP Morgan, CLSA and Goldman Sachs in a bid to convince them that tax proposals were not targeted at investors with a "substantial commercial presence" in Mauritius.

About 40 percent of nearly $247 billion foreign direct investment flows to India over the last 12 years have come from Mauritius, and tax authorities believe a large part of it is routed by Indian companies to evade taxes.


Mukherjee also said a move to amend income tax laws retrospectively would not override the provisions of double taxation avoidance agreements India has signed with 82 countries, including Mauritius.

India wants to tax some already-completed mergers of foreign companies with Indian assets, potentially putting Vodafone back under the taxman's spotlight for more than $2 billion in taxes even after India's Supreme Court ruled the tax office did not have jurisdiction over cross-border deals.

Vodafone bought Hutchison's Indian operations by taking over a subsidiary based in the Cayman Islands, which does not have a tax avoidance treaty with India.

The company has threatened India with arbitration proceedings saying the tax proposals violated international legal protections granted to Vodafone and other foreign investors in India.

Mukherjee also said retrospective tax would not be applied in cases where tax assessment has been completed.

"The question here is: whether having regard to the Supreme Court's order, the Vodafone case can be regarded as complete?" said Dinesh Kanabar, deputy CEO and chairman for tax at KPMG, which advised Vodafone in the tax case.

Samir Kanabar, a tax partner at Ernst & Young, said Monday's proposals may not benefit Vodafone.

"There was no assessment in the case of Vodafone. It was held to be an assessee in default because it did not withhold tax from Hutch. So, only the fine print can say whether Vodafone has been covered by this," he said.

Accusing the government of leading the country to a situation of policy paralysis, the BJP on Monday slammed then Finance Minister P Chidambaram for committing the original sin by not following fiscal discipline.

Initiating the debate on the Finance Bill in the Lok Sabha, Yashwant Sinha said Finance Minister Pranab Mukherjee was facing the results of the mistakes committed by Chidambaram (as the then Finance Minister).

"Mukherjee is not at fault...the original sin was committed in the year 2008-09...the way we took liberty and mocked fiscal deficit, we have not been able to bring back the economy on its tracks," he said.

Sinha also charged the UPA government with throwing the Fiscal Responsibility and Budget Management Act out of the window.

He said while NDA was sad at failing to come to power in 2009, he at times feels that had it happened, the UPA would have targetted it for economic crisis.

"Therefore, our sorrow is reduced that we lost the 2009 polls and these people have been left to stew in their own juices," he said.

Accusing the government of policy paralysis in decision making, Sinha - a former Finance Minister - said it seems the government was functioning on ventilator.

He referred to an article in the 'Economist' magazine which had reportedly dubbed Prime Minister Manmohan Singh and Pakistan President Asif Ali Zardari as lame duck.

Referring to controversy over the move to enact certain legislations with retrospective effect, Sinha claimed that in February, 2010 Prime Minister Manmohan Singh had written to then British Prime Minister Gordon Brown on Vodafone stating that there is no retrospective application of taxation.

"How did he make this statement? Was this draft prepared in the Finance Ministry? If the draft has been prepared in the Finance Ministry, I am quite sure they would not have made a crucial mistake of this kind," he said.

Referring to the controversial remarks made by Chief Economic Adviser Kaushik Basu that major economic reforms in India would hit a roadblock and are unlikely to happen before the next Parliamentary elections in 2014, Sinha said he does not need to offer any explanation because he spoke the truth.

Slamming the government for mocking the poor, he said instead of asking MPs about the definition of poor, "professor this and professor that" are being consulted about the poverty line.

Claiming a big fall in confidence index, Sinha said corporate India has lost its confidence as it was disappointed by the Budget presented by Mukherjee.

He also questioned the government statistics and said it has become "notoriously unreliable". A Parliamentary panel had also expressed concern about it as it "projects not only the government but the entire country in a poor light."

The BJP leader also suggested that the expenditure budget should not be an exercise shrouded in secrecy.

He said though once he had said in the House that the government must go, today he wanted it to continue in its present form as it suited BJP.

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