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Japanese firms are worried over transfer pricing issues
June, 28th 2016

Kenji Hiramatsu, Ambassador of Japan to India, said Japanese firms are concerned with the Indian taxation regime as far as transfer pricing issues are concerned. In an interview with BusinessLine, he said it is not clear if the India-Japan Civil Nuclear Deal will be approved by their National Diet in the autumn session. Excerpts:

The Japanese industry has been concerned about the taxation regime in India. Did you raise the concerns when Finance Minister Arun Jaitley was in Tokyo earlier this month?

Some problems have been sorted out. But, we keep discussing on regular basis at the highest level. It was raised during the Finance Minister’s visit. But we know it will take some time to solve all taxation related issues.

What is it specifically you are looking at in India’s tax structure?

Transfer pricing issues are a main concern for Japan. Then the delay in Goods and Services Tax (GST) is a concern. We also have a problem with Minimum Alternative Tax on SEZs.

What about the Civil Nuclear deal? Why the delay in approving it?

This deal is important for us. We reached a general agreement when Prime Minister Shinzo Abe came to India. We are now in a phase of technical fine tuning and legal scrubbing. So the deal has to be finalised. This is a legal document and it takes some time. I don’t think there is any delay or any problems.

So when do you plan to present it to the Diet?

I don’t know when will we be in a position to present it to the Diet. We have an extraordinary session of the Diet coming up this autumn around September-October. Last year we did not have the session. We are making a progress but I cannot say whether it will be ready before that.

Do you support India’s membership to the Nuclear Suppliers’ Group (NSG)?

The two Prime Ministers (Modi and Abe) affirmed their commitment to work together for India to become a full member in the four international export control regimes – Nuclear Suppliers Group, Missile Technology Control Regime, Wassenaar Arrangement and Australia Group, with the aim of strengthening the international non-proliferation efforts.

The review of the India-Japan Comprehensive Economic Partnership Agreement (CEPA) is stuck over giving India more market access in pharmaceuticals. Can you give an update? When do you plan to sign the Mutual Recognition Agreement (MRA) in pharmaceuticals that India is demanding?

Talks are going on. We need to understand the Indian pharmaceutical markets soon and the regulatory systems working here and see what kind of a harmonisation is possible.

With regards to MRA, it will be too early to give a timeline. This concerns public life. Liberalisation of the pharmaceutical market should always be considered in a very careful manner.

How do you plan to address India’s concern on rising trade deficit under the CEPA? Is there a timeline to complete the CEPA review?

We are talking regularly to address these issues. The Joint Committee on the CEPA will be meeting soon to discuss all these issues.

We are trying to speed up the review process. That is why we are trying to have the meeting of the joint committee as quickly as possible. It has only been organised once. There is no fixed frequency for it to meet. It last met in 2012. I think it is time they met now.

Are you facing some hurdles on implementing the High Speed Railways (HSR)? What was decided at the meeting in May?

On HSR, both leaders have a very strong political commitment to speed up the process for implementing the work. We had already two joint committee meetings in February and May. I think they will find a way if there are any problems. This is a very important and symbolic project.

What about the Delhi-Mumbai Industrial Corridor (DMIC) project? Why is there a delay? Is it because funding from Japan has been slow?

There are no issues with the funding. I have to analyse why this project is not being speeded up.

Would you agree that the private players were not enthusiastic about the DMIC project?

I don’t think so. There are SEZs and attractive investment opportunities. Things are moving. But we have to speed it up.

On defence, when will the deal on ShinMaywa US-2 amphibian aircraft be concluded? Is it stuck on price?

Well, this is a sophisticated plane. It is for India to see the various aspects of this plane. There is high-technology in this plane that comes for a price. But I don’t know what India is thinking about. It is up to India to decide what it wants. India has an intention to acquire these planes but for that they need consensus on various aspects, including the price factor.


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