New Delhi:
As the Narendra Modi government completes one year in office, top industrialists say the biggest disappointment has been the handling of taxation issues for foreign institutional investors (FIIs) that led to huge outflows from stock markets last month.
After the tremendous euphoria that greeted the arrival of the Modi government, stock markets have witnessed huge volatility since April, which most analysts attribute to uncertainty over tax policies for foreign investors.
Speaking to NDTV, Adi Godrej, chairman, Godrej Group, said the government did not realise the gravity of the issue and took too long to address the concerns of FIIs. "It (handling of the tax row) was a big disappointment. The government should have resolved the issue two-three months earlier. The government should have ensured FIIs are not worried about investing in India," he said.
News about a minimum alternate tax or MAT on FIIs had been floating for months, but it was only in mid-April that Finance Minister Arun Jaitley quantified the tax demand as Rs 40,000 crore. The government later clarified that tax notices were sent to only 68 foreign institutional investors raising a total tax demand of Rs 600 crore.
The uncertainty over tax demands caused capital outflow, which led the rupee to depreciate. This forced the government to refer the controversial MAT issue to a three-member panel led by Justice A P Shah.
Kiran Mazumdar-Shaw told NDTV that the government did not handle the tax issue "deftly", adding that Finance Minister Arun Jaitley should be better briefed on these issues.
Speaking to NDTV earlier, Mr Jaitley had explained the government's position saying India is not a tax haven and that with the Rs 40,000 crore, he can change the face of the country's irrigation.
Former RBI governor Bimal Jalan said he appreciates the fact that the government agreed to review its position by referring the matter to the Shah panel and didn't stick to its earlier stand.
Terming it "learning by doing", Mr Jalan told NDTV that it's important that a government is ready to review a policy after receiving feedback.