The Confederation of Indian Industry has said the lack of a tax treaty between India and Kuwait will prove to be a stumbling block for the Indian companies who plan to set up shop in Kuwait for reconstruction in Iraq.

While Kuwait has already signed tax treaties with France, Germany, South Korea, China, the UK and the Netherlands, a tax treaty with India is still pending.

The industry body pointed out that the tax treaty between the two countries should be signed at the earliest to facilitate Indian companies to set up shop there.

Under the tax treaty, the non-Kuwaiti companies get various sops in terms of reduction of the tax liability. Currently, the non-Kuwaiti companies, which do not come under the ambit of the tax treaty, have to pay a rate of 55 per cent.

However, the CII said with Bechtel refusing to provide any assistance to the sub-contracting companies, a chunk of the business might not come to India immediately.

According to the industry body, a major chunk of business will come to India only after the first 18 months. "At present, the country will be focusing on setting up basic infrastructure and Indian companies may not get a major share of the business here," said a senior CII official, who led a delegation to Kuwait to study the business opportunities there.