Russian oil giant Rosneft on Friday asked India to look at its policy on withholding tax, calling it against the spirit of the double taxation avoidance treaty between India and Russia.
“If an Indian company invests in Russia, yes it has to give tax and dividends, but on the other side, when we invest in India, we have to give all of this, but on top of it, we are being charged a withholding tax of 20 per cent. For us, this is really not symmetrical,” Rosneft’s first vice-president for economics and finance, Pavel Fedorov, said.
The issue cropped up on the sidelines of Russian President Vladimir Putin’s visit to India during which he had signed a deal to sell a missile defence system and a pact for a railway corridor linking the two countries through Iran and Azerbaijan.
Two months back Rosneft had completed its acquisition of Essar Oil for an estimated $12.9 billion and it would have to pay a 20 per cent withholding tax on long-term capital gains on the deal.
The India-Russia tax avoidance treaty provides for a lower 10 per cent withholding tax on dividends, royalty and interest incomes. However, the treatment of capital gains seems to be missing from the treaty.
Fedorov said India’s market’s potential was unparalleled and “that’s why we love to invest in India”. But there was need to streamline the taxation system in line with international tax regimes.
Rosneft, he said, is willing to increase its investment in Nayara Energy, formerly known as Essar Oil.
“We are looking at other assets. We are looking at expansion of our fuel network here in India because we already have more than 4,000 fuel stations, but we do want to see it being done on a globally competitive basis. For that we do need to have clarity on the taxation issues.”
Credit claims
Fedorov criticised the system of tax offsets. Rosneft had difficulties in claiming credit for taxes it paid on inputs at its Vadinar refinery in Gujarat. The goods and services tax (GST), which has replaced excise and VAT on most goods, has left out fuel out of its ambit.
He said Vadinar had all the infrastructure and logistics to become a global trading hub. “We want to use Vadinar not only for Indian markets but also for the rest of Asia.”
