New Delhi : Singapore has replaced Mauritius as the largest source of foreign direct investment into India.During the last financial year, India attracted USD 5.98 billion in FDI from Singapore, whereas it was USD 4.85 billion from Mauritius, according to the data of the Department of Industrial Policy and Promotion (DIPP). According to experts, the Double Taxation Avoidance Agreement (DTAA) with Singapore incorporates Limit-of-Benefit (LoB) clause which has provided comfort to foreign investors based there.“LoB clause in India-Singapore treaty justifies the substance in Singaporean entities, bringing certainty and avoiding chances of litigations,” Head of Tax and expert on FDI with corporate law firm Amarchand & Mangaldas Krishan Malhotra said. FDI inflows from Mauritius have started drying up on fears of the impact of General Anti Avoidance Rules (GAAR) and possible re-negotiation of the tax avoidance treaty, he added.
Investors from across the globe have preferred to route funds into India via the Mauritius route because of the tax advantages offered by the island nation located at the tip of the African continent. Singapore has, however, managed to gain some glitter in recent years as India offered similar tax sops as part of the Comprehensive Economic Cooperation Agreement, although the treaty came with some riders to ensure that only genuine investors could benefit.