India-Mauritius enhance efforts to Combat Tax avoidance through Potential Treaty Amendments 

Recently, the Mauritius Cabinet approved the signing of a Protocol on 23 February 2024, to amend the tax treaty with India, aligning it with the Base Erosion and Profit Shifting (‘BEPS’) framework. Following that, on 7 March 2024, India and Mauritius formally signed a Protocol amending the India-Mauritius tax treaty.

Once notified, the Protocol may have significant impact on the potential as well as past investments. The introduction of the Principal Purpose Test (PPT) which is designed to prevent the misuse of tax treaties marks a substantial change for the India- Mauritius Treaty. It aims to deny treaty benefits wherein obtaining such benefits was one of the principal purposes of an arrangement or transaction. The introduction of PPT signifies a shift in the tax landscape and underscores the importance of reviewing existing investment structures and strategies. Another important aspect pertains to implication of Amended Protocol on the investments made prior to 1^st April 2017 which are otherwise protected under the grandfathering benefit. 

It is worth mentioning that the CBDT issued a message on X (Twitter) on 12 April 2024, addressing concerns regarding the treaty amendment, possibly to alleviate investor apprehensions. It was also clarified that the Protocol is pending ratification and assured that any queries would be addressed as needed.

In the attached newsflash, we have analysed the potential amendments to the Treaty vide Protocol dated 7 March 2024. 

Hope you would find the same useful.