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India, an attractive investment destination: Deloitte

January 08, 2013 19:17 IST
India remains an attractive investment destination even as taxation uncertainties pose a challenge, according to global consultancy Deloitte.

A survey of investors, spread across various segments, conducted by Deloitte also found that investors were looking for more clarity on certain tax issues.

"...while India continues to be an attractive investment destination, the dynamic Indian tax framework create some apprehensions in the investors' perception about the approach on the tax issues related to transactions in India," it said.

Deloitte said the Indian tax landscape has been in limelight globally due to the landmark ruling of Supreme Court in Vodafone case followed by the retrospective amendments along with the proposed General Anti-Avoidance Rules (GAAR).

"Around 63 per cent consider Singapore to be a favourable jurisdiction for investments into India," said the survey, adding, 53 per cent consider uncertainties in tax position as a significant challenge for doing business in India

Also, over 80 per cent of the participants indicated that there should be rationalisation in India's corporate tax rates-in the range of 20 per cent to 30 per cent.

It further said majority of the participants believe that the draft guidelines issued by Shome panel are adequate and advice of the GAAR panel should be followed.

However, the results suggest that respondents were concerned over the independence of the members in the GAAR panel, which could otherwise falter the whole perspective, increase prevailing uncertainties thereby resulting in higher tax litigations, Deloitte added.

"This could create a negative image for India Inc. on the global investment landscape," it said. A Deloitte spokesperson said investors prefer a jurisdiction which provides certainty and positive perception.

"We have also found during the survey that there is a wide concern over the approach adopted by Indian revenue authorities in examining such investments," the spokesperson said.

The survey also suggested that there is a need for a robust tax policy and an equally strong tax litigation process or an effective dispute resolution mechanism, to reinforce a stronger faith of multinational investors.

It said that investors believe India has an effective tax credit mechanism, which helps in reducing the overall tax burden, though there was still a room for improvement.

"On an overall basis the result indicate that Indian tax climate was considered to be reasonably favourable and India continued to be an attractive investment destination despite some dissatisfaction in the minds of the investors with the existing tax policy and the litigation framework in India," Deloitte added.

The survey focused on five key factors – Intermediate Holding Company, Permanent Establishment, Foreign Tax Credit, GAAR and Tax Litigation.

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