India-Mauritius DTAA: India Agrees for Early Renegotiation of the Treaty

The Indian authorities have agreed for an early renegotiation of the India-Mauritius Double Taxation Avoidance Agreement (DTAA) and consequently the Joint Working Group (JWG) will meet on 23 and 24 August 2012 in Mauritius.

This follows an official request made in April this year by the Vice-Prime Minister, Minister of Finance and Economic Development, Mr Xavier-Luc Duval, to the Indian authorities for an early meeting of the JWG in Mauritius to carry on with negotiations under the India-Mauritius DTAA.

The issue regarding an early meeting of the JWG to pursue further discussions on the DTAA was also raised by Vice-Prime Minister Duval with the Minister of Finance of the Republic of India, Mr Pranab Mukherjee, during the IMF/World Bank Spring Meetings in Washington in April this year.

The Minister of Foreign Affairs, Regional Integration and International Trade, Dr Arvin Boolell, who is leaving for India today, will have discussion with the Indian authorities on the forthcoming meeting of the JWG in Mauritius.

Following the measures announced in the Indian budget, particularly the introduction of the General Anti-Avoidance Rules (GAAR), it has been deemed necessary for Mauritius to clear any uncertainties arising under the DTAA. Because of the possibility of overriding effects of the GAAR on tax treaties signed by India with other countries, the impact of the measures announced in the budget has raised concern from these countries. There is apprehension that the GAAR provisions and the treaty overriding provision would impact majorly on taxpayers outside India.

It will be noted that at the previous meeting of the Joint Working Group in Port Louis in December 2011, Mauritius has been attentive to the concerns expressed by the Indian authorities arising from the operation of the DTAA. Mauritius has offered, as part of an all-inclusive package, to consider changes to the treaty that would address the Indian concerns, while ensuring that these do not affect the mutually beneficial effects of the treaty. Concrete proposals have been made to India and the Mauritian Government is optimistic that both sides can conclude a mutually acceptable package that would yield a win-win outcome for both parties.

So far, the existing DTAA between Mauritius and India has helped Mauritius in the development of its financial services sector and the Treaty has also benefited India in terms of Foreign Direct Investment over the last 20 years.