Context
• A revised tax treaty between India and Mauritius will come into effect only once the two countries sign the
agreement and will not be applied retrospectively.
About
• The new provisions in the treaty include a principal purpose test, which will be used to judge whether tax
benefits under the treaty will apply to investments or not.
• As per the amended treaty, tax benefits for investments will not be granted if it is ascertained that availing
tax benefits was one of the reasons for the transaction.
Overview of India and Mauritius Relations
• India has close, long standing relations
with Mauritius, an island nation in the
Western Indian Ocean.
• Diplomatic Relations: India and
Mauritius established diplomatic
relations in 1948 and have become key
trading partners in the Asian continent.
• As a tribute to Gandhiji and the Indian
freedom struggle, the National Day of
Mauritius is celebrated yearly on March
12 (the date of launch of Dandi Salt
March).
• Indian origin people comprise nearly 70% of the island’s population of 1.2 million (28% Creole, 3% Sino-
Mauritian, 1% Franco-Mauritian).
• Commercial Relations: Since 2005, India has been among the largest trading partners of Mauritius.
• For the FY 2022-2023, Indian exports to Mauritius was USD 462.69 mn, Mauritian exports to India was
USD 91.50 mn and Total trade was USD 554.19 mn.
• Cumulative FDI worth USD 161 billion came from Mauritius to India in the two decades from 2000 – 2022
(26% of total FDI inflows into India), largely due to the Double Taxation Avoidance Convention (DTAC).
• India and Mauritius entered into the Double Taxation Avoidance Agreement in 1982 so non-residents
investors can avoid paying double taxes.
• Mauritius and India signed the Comprehensive Economic Cooperation and Partnership Agreement
(CECPA) in 2021, and is the first trade agreement signed by India with an African country.
• Defence Relations: India is the preferred defence partner of Mauritius for acquiring platforms/equipment,
capacity building, joint patrolling, hydrological services, etc.
• The first agreement relates to the transfer of a Dornier aircraft and an Advanced Light Helicopter, Dhruv,
on lease to Mauritius.
• The second agreement relates to a $100 million Line of Credit (LoC), to enable the procurement of defence
equipment by Mauritius.
• SAGAR: The term SAGAR – – ‘Security and Growth for All in the Region’ was coined by PM in 2015
during his Mauritius visit with a focus on the blue economy.
• It is a maritime initiative that gives priority to the Indian Ocean region for ensuring peace, stability and
prosperity of India in the Indian Ocean region.
Areas of Concern
• Tax Treaty Misuse: The Double Taxation Avoidance Agreement (DTAA) between India and Mauritius
had been a point of concern due to its potential misuse for illicit activities like money laundering and
round-tripping of funds.
• Security Concerns: With Mauritius emerging as an important maritime entity in the Indo-Pacific region,
security concerns are paramount.
• India and Mauritius have a strong defence partnership, but maintaining and enhancing this partnership in
the face of evolving regional dynamics can be challenging
• Economic Challenges: Despite being major economic partners, there are concerns regarding trade
imbalances and the need to diversify the trade basket.
• Both countries may need to explore new avenues for trade cooperation and address any barriers that hinder
the flow of goods and services.
• Presence of China: In recent years, several external powers, including China, have made increasing inroads
in Africa and through Indian Ocean.
• In 2021, China’s Free Trade Agreement (FTA) with Mauritius came into effect.
• This agreement will help China expand the Belt and Road strategy in Africa.
• China’s increasing presence in the region will pose concerns for India.
Way Ahead
• The relationship between India and Mauritius is multifaceted and has grown stronger over the years. The
two nations continue to work together in various fields, including infrastructure, FinTech, culture, and more.
• While India and Mauritius share cultural contiguity dating back to the colonial times and a special
partnership in recent years, India cannot take its influence in Mauritius for granted and should continue to
enhance its engagement with the important island country.