India plans review of Mauritius tax treaty, Sensex below 17000

Sentiment on Dalal Street turned negative immediately after Minister of State for Finance SS Palanimanickam told lawmakers that India is considering a review of the Double Taxation Avoidance Treaty with Mauritius to raise revenues.

The Sensex plunged below the psychological 17000 to trade at 16949.34, down 200 points, while the Nifty is down 1.28 percent at 5122.

Indian officials have said the country was losing more than $600 million every year in revenue because of the tax treaty, besides incurring the risk of militant groups using it to route money into India.

The government has been under pressure from opposition parties to renegotiate the treaty, as Indian investors ship their money to Mauritius and then funnel it back untaxed.

Palanimanickam said even after holding seven rounds of bilateral talks, the government feels an unwillingness on the part of Mauritius to address the tax evasion issue.

The minister said 39.5 percent of the total foreign direct investment flows into the country between April 2000 and February 2012 have been channeled through Mauritius.

However, no fresh dates have been finalised for the next round of talks on the issue, he said.

In the BSE, all the sectors are in the red (baring healthcare) with Capital Goods being the biggest loser (-2.4 percent) due to the steep fall in BHEL. The BSE Sensex hit its lowest level in 2-1/2 weeks. The 50-unit S&P CNX Nifty hit its lowest level in more than five weeks. The market breath is negative as 1142 stocks have declined, 267 have gained while 72 are at the same level.

In the 30-share Sensex pack, 27 stocks are in the red while only three are in green. Hero Moto, Bajaj Auto and DLF are the top losers on the Sensex while Cipla and Wipro are the top gainers.