mumbai mauritius on wednesday signed the multilateral instrument mli to mitigate tax avoidance through base erosion and profit shifting beps tactics however it has not covered the tax treaty with india under the mli signed by it india which signed this mli earlier on june 7 had covered the indiamauritius tax treaty according to international tax experts the main reason for excluding india under the mli is to ensure that the existing investments in indian securities made prior to april 1 2017 by residents of mauritius stand protected from antiabuse or treaty shopping clauses this allays fears of existing investors during 201617 mauritius was the top source of foreign direct investments into india with inflows of rs 105587 crore or 33 of total inflowsmncs tend to park profits in low tax jurisdictions to reduce their global tax outgo a beps tactic the oecdled base erosion and profit shifting beps project had sought to curb such practices through the medium of an mli which enables the existing network of tax treaties entered into between countries to be updated countries that are signatories to the mli do not have to renegotiate treaties bilaterally to strengthen antiavoidance or treaty shopping provisionsan official statement from the mauritius ministry of finance and economic development points out that 23 tax treaties entered into by mauritius with various countries have been covered under the mli signed on july 5 for the remaining tax treaties not covered by the mli mauritius will discuss bilaterally with the respective treaty partners to implement the beps minimum standards at latest by end of 2018 the beps minimum standards include action point 6 relating to prevention of tax treaty abuseafter decades of negotiation india had signed a revised tax treaty ie protocol with mauritius on may 10 2016 this protocol gave india the right to tax capital gains on transfer of indian shares acquired on or after april 1 2017 the existing investments were grandfathered further the protocol provided for a twoyear transition period up to march 31 2018 during which the tax rates on capital gains would be half of indias prevailing tax rate a limitation of benefit clause was also introduced to prevent tax treaty abusea former bureaucrat from mauritius said the main reason for not including india under the mli appears to be to ensure that the beneficial provisions in the protocol stand it also leaves the door open for future negotiation with indiagirish vanvari national head of tax kpmg india added the step taken by mauritius indicates that the tax treaty related beps measures will not impact investments in india routed through mauritius particularly grandfathering of investments provided in the protocol