Apurva Shah, head of institutional research at Mumbai-based brokerage Prabhudas Lilladher Ltd., comments on the decline in Indian stocks after Business Standard reported that the South Asian nation will seek to tax capital gains on investments made through Mauritius.
The government has yet to start negotiations after Mauritius expressed willingness to hold discussions three months ago, Shishir Jha, a spokesman for the Indian tax board said in New Delhi today.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, dropped as much as 3.1 percent to 17,314.38 and was at 17,637.29 as of 11:44 a.m. in Mumbai.
“As far as the India-Mauritius tax treaty is concerned, it is bit too early to start speculating about what the renegotiated treaty will be, what changes may be there and how they will affect Indian investments.
“The governments have only proposed to talk and this issue has been around for at least 10 years now.
“All the Indian government has been asking is to modify the rules so round-tripping of investments doesn’t happen. It is being heard that any legitimate money won’t be affected. The fear of so-called black money finding its way back into India via the Mauritius route is the major concern of the Indian government. If the scope is limited to that, I don’t think it is very negative.
“This is something that is clearly still far out. In a bearish environment you just need a bit of news to start an extreme reaction.”
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