Mauritius is looking to revive efforts to put in place a comprehensive economic cooperation pact with India, close on the heels of sorting out long-pending issues related to the bilateral tax treaty.
The island nation, a major source of foreign direct investments coming into India, is also eyeing a preferential trade agreement.
Minister of Finance and Economic Development Pravind Jugnauth has said that Mauritius would revive talks with India on Comprehensive Economic Cooperation and Partnership Agreement (CECPA).
“Now that the issue of DTA (Double Taxation Agreement) with India has been resolved, the government will revive and finalise the negotiations with New Delhi on the CECPA including a Preferential Trade Agreement,” he said in his 2016-17 Budget speech recently.
India exports petroleum products, pharmaceuticals, cereals, cotton and electrical machinery, among others, to Mauritius. The island nation exports to India include iron and steel, pearls and precious/semi-precious stones.
In 2014-2015, India exported $1.9 billion worth goods to Mauritius while the imports during the same period were to the tune of $21.19 million, as per official figures.
According to the Indian High Commission in Mauritius, the island nation was the “single largest source of FDI into India during the financial year 2014-15, with FDI equity inflows amounting to $9.03 billion – 29 per cent of total inflows in 2014-15”.
After long drawn negotiations, the amendment to the 1983 Double Taxation Avoidance Convention (DTAC) was signed by India and Mauritius in May. With the changes, India can impose capital gains tax on investments routed through Mauritius.
For two years starting from April 1, 2017, capital gains tax would be levied at 50 per cent of the prevailing domestic rate and after that, full rate would be applicable.
The three-decade-old taxation treaty, which came into force from April 1, 1983, is said to have been misused by many Indian and multinational companies to avoid paying tax or to route illicit funds.
The island nation was the biggest single source of foreign direct investment into India in 2014-15, accounting for about 24 per cent of $24.7 billion FDI.
In his speech, Jugnauth also expressed his gratitude to the Indian government for the “exceptional financial support of $353 million, that is some Rs 12.7 billion”, which the island nation would be receiving over a four-year period.