Amendment of india mauritius DTAA and its impact on foreign investment in India

Abstract

The objective of this paper is to the study the impact of the amendment of India Mauritius DTAA on foreign investment in India. It provides adetailed analysis of how Mauritius, a small island country became the most favourite route for foreign investor in India during the period 2000 to 2017. The paper identifies the reasons for emergence of Mauritius as the foremost exporter of foreign capital to India and in this context examines the role of the Agreement on Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes of Income and Capital Gains between India and Mauritius (DTAC). In 2016, DTAC was amended and with the implementation of General Anti Avoidance Rule (GARR) from 2017 by India and changes in international taxation zeitgeist due to OECD project on Base Erosion Profit Shifting (BEPS) the Mauritius route faced new challenges. The paper studies the influence of these changes on FPI and FDI investments flow from Mauritius to India.It finds that advantage of Mauritius in FDI and FPI flow has come down in 2018-19 and its share in foreign investment is likely to come down further with the amendment of the DTAC taking full effect from April 2019. However,amendment has given Mauritius a competitive advantage in channelizing debt investment to India as compared to its competitors like Singapore and the Netherlands and in future we may see higher debt investment from Mauritius.