We have to work hard to improve the creditworthiness of the retro tax

- In 2013, the implementation of this controversial tax law started a conflict with a foreign company

After a global defeat in tax-related cases with Cairn Energy and the UK's Vodafone plc, the Modi government has finally announced the repeal of the controversial retrospective tax law. The promise to abolish this controversial tax was made in the 2014 election promises. Now, three years after coming to power, the Government of India will amend the Income Tax Act to abolish this controversial predecessor tax. This controversial precedent tax has tarnished India's image in the global corporate sector and the decision to abolish the retrospective tax has been taken with a view to improving it as well as regaining the confidence of global investors. However, the government will have to work hard to get rid of this controversial tax law.

Pranab Mukherjee, the then finance minister in the Congress-led UPA government, introduced the retrospective tax law in 2014. He amended the Finance Act to give the Income Tax Department the power to levy retrospective taxes. The law empowered the income tax department to go back in time and levy tax on capital gains, where ownership had been transferred abroad but commercial property was in India. Thus, under the retrospective tax, the Government of India was empowered to levy tax from foreign companies at a later date. However, instead of benefiting from this law, India has suffered a great loss. This is because there has been a lot of controversy over the retrospective tax issue and India's credibility has been widely tarnished by attracting foreign investment. 19 cases were reported under retrospective tax.

Currently in India, Walmart Inc. The Consumer Protection Regulation is fighting the draft, as it is expected to weaken Flipkart's business model. Walmart acquired Indian e-commerce Flipkart in 2014 for 12 billion. Similarly there is an ongoing conflict with WhatsApp on the privacy policy issue.

On the one hand, the Chinese government is cracking down on private players in everything from fintech and online gaming to ride-hailing and online education. So the government in India is targeting global companies, reducing competition and turning the economy into a monopoly for local capitalists. The current example is the telecom and airport sectors.

Recently, the Reserve Bank banned MasterCard Inc. from issuing new credit or debit cards in India for non-compliance with localization rules.

If the Modi government had abolished the retrospective tax after assuming power in 2014, it would have been enough to signal India's intentions to keep the economy free, transparent and rule-based. However now a lot of hard work has to be done.