'Govt's mishandling of GAAR scared investors'

Amid controversies over Vodafone tax matter and GAAR, BJP today hit out at the government saying it has mishandled these issues creating scare and uncertainty among the foreign investors.

The main Opposition party suggested that Prime Minister Manmohan Singh and former Finance Minister Pranab Mukherjee were not on the same page with regard to the retrospective amendment to tax laws against the backdrop of Vodafone case, leading to the current precarious situation.

Senior Bharatiya Janata Party leader and former Finance Minister Yashwant Sinha went to allege that the Prime Minister had given a wrong assurance to his then British counterpart Gordon Brown that there would be no retrospective amendments to tax laws.

He underlined that the Prime Minister cannot distance himself from the policy action taken by Mukherjee, who resigned last month to contest for President elections.

"This (Vodafone) case is a clear case of total mishandling.

Without disputung the principles of government levying capital gain tax, I am saying this case has been completely mishandled," told PTI in an interview.

The government has amended Income Tax Act with retrospective effect to bring into tax net all overseas deals involving domestic assets.

The amendment would result in a Rs 20,300 crore (Rs 203 billion) tax and interest liability for UK-based Vodafone telecom company arising out of $11.2 billion Vodafone-Hutch deal of 2007.

Asked about the perception that this development has created a scare among the foreign investors, Sinha agreed.

"This case is bound to have an impact. Foreign investors are interpreting it as uncertainty.

"He cannot be sure what will happen 10 years, 5 years from now because tax laws can be tweaked with retrospective effect," he said.

"I am not commenting on individual case. What I am saying is when you take a decision of this kind, then you should be aware of the consequences, what is going to be the economic consequence of a decision of this kind," Sinha said.