The India-Mauritius DTAA, which entered into force on 1 April 1983, was amended by way of Protocol signed on 10 May 2016 [1] (2016 Protocol), wherein largely the source country taxation rights were enhanced and Limitation of Benefits (LOB) clause was included apart from the Exchange of Information (EOI) and Assistance in Collection of Taxes related provisions. The 2016 Protocol did not contain the Base Erosion and Profit Sharing (BEPS) related changes.
To recollect, Mauritius was a part of list of Double Taxation Avoidance
Agreements (DTAAs), as notified by India, to be amended through multilateral
instrument (MLI), while India was not notified by Mauritius under its list of
DTAAs for MLI purposes. Accordingly, India-Mauritius DTAA was not amended in
line with MLI pursuant to BEPS framework. In a subsequent press release dated
10 July 2017, Mauritius announced that for the DTAAs which are not covered by
the MLI, Mauritius will discuss bilaterally with the respective treaty
partners, including India, in order to implement the BEPS minimum standards.
Consequently, an amending Protocol was signed on 7 March 2024 [2]
(2024 Protocol) to better align with the Organisation for Economic Co-operation
and Development (OECD) proposals on BEPS. The Protocol seeks to introduce BEPS
minimum standard anti-abuse provisions including:
- A revised preamble to expressly
provide avoidance of treaty abuse as the purpose of tax treaty. The phrase
“for the encouragement of mutual trade and investment” has been omitted in
the revised preamble.
- Inclusion of Principal Purpose
Test (PPT) rule.
While the Protocol has not yet been
notified by either of the countries, recently, the Mauritian Cabinet, in a
meeting held on 17 July 2026 [3] , has agreed to ratify the 2024
Protocol, which was deferred due to concerns expressed by stakeholders and
investors in Mauritius and India on application of 2024 Protocol.
Further, the Highlights of Cabinet Meeting also provide that “the matter was raised with Prime
Minister Modi who gave the assurance of the continued stand of India of not
taking any action that would undermine the benefits of Mauritius under the
DTAA” and ”subsequently,
the Indian authorities have clarified their stand which is now favorable to
Mauritius, thus the decision to ratify the Protocol…”
While the text of 2024 Protocol to be ratified is not available, a protocol
comes into force after both the countries notify each other about completion of
the procedures required by their respective laws to implement the provisions of
the Protocol. As on date, both countries are yet to notify each other of the
completion of the procedures to implement the Protocol.
Comments:
The 2024 Protocol is in furtherance of the commitment of India and Mauritius to
further develop their economic relationship and demonstrates their commitment
towards combating BEPS. The decision of Mauritius ratifying the 2024 Protocol
represents a step toward bringing the Protocol into force. On completion of
formalities, India-Mauritius DTAA will formally include the BEPS minimum
standard anti-abuse provisions. Given that the text of the Protocol and related
details are not yet available, further clarity may be awaited on its precise
scope, extent including the date of application.
From India’s stance, it may be noted that India has issued below Circulars
which provides clarity and relief in terms of how PPT and GAAR provisions shall
be applicable:
- Circular No. 1/2025 dated 21
January 2025, clarifying that bilateral PPT provisions are prospective in
nature and capital gain grandfathering provisions providing for no source
taxation in respect of shares acquired before 31 March 2017 under the
India-Mauritius DTAA remain outside the scope of PPT [4] .
- Amendment in GAAR
grandfathering provision by Notification No. 54/2026, stating that
consequences of GAAR ought not to be invoked in respect of income from
transfer of investments made prior to 1 April 2017 [5] .
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