We should avoid retrospective taxing: Ravi Shankar Prasad

During tenure of UPA-II government, British telecom giant Vodafone Plc was asked to pay Rs 20,000 cr

On his first day as Union minister of law and justice, as well as for communications and information technology (IT), Ravi Shankar Prasad said the new government would avoid retrospective taxation to boost investor confidence.

That was an indication of how the government might deal with the long-standing tax disputes with companies such as Vodafone.

“Retrospective taxes should be avoided in the maximum,” Prasad said after first taking charge as the law minister, after which he went to the communications ministry. “Our larger view is that India needs investment...Those who invest in India must have the assurance of a stable fiscal policy and legal regime,” he said.

In the earlier government, British telecom giant Vodafone Plc was asked to pay Rs 20,000 crore in taxes, interest and penalties on its its deal with Hutchison Essar in 2007. Vodafone has invoked international arbitration after conciliatory efforts between it and the government had failed.

The earlier government had also changed the rules to tax certain merger and acquisition deals retrospectively, in 2012.

On telecom, Prasad said his priority for the sector would be restoring investor confidence. “I am aware of the problems and how the past incidents have dented the sector. Telecom was in the news for all the wrong reasons. My priorities will be to set things right. I will focus mainly on two things -- quality of services and investors’ confidence restoration, ensuring a softer and stable regulatory regime,” he said.

On foreign direct investment in telecom, he said the rules should be  “quick, transparent and stable”. However, he also said the new government would strictly implement the existing regulations.

He also said improving the quality of service and promoting broadband rollout would be thrust areas. “Just like the Vajpayee government (1998-2004) was known for building road highways, the Modi government should be known for broadband highway,” he said.

Prasad was given a two-hour presentation at the department of telecommunications. He said he'd asked for details on litigation in the sector. “We need to understand these issues,” he said.

Trading and sharing of spectrum is one issue he said he'd like to work on during the initial weeks. “We’ll take a call,” Prasad said, to a question on when the guidelines could be expected on this.