Explain the meaning and need of the multilateral instrument to implement tax related measures in Indian context.

The multilateral instrument is a treaty which is designed to help implement the recommended measures to avoid tax treaty abuse. Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting� is the�official name of the multilateral treaty framework that aims to prevent Base Erosion and Profit Sharing.
�Need of MLI

• It was necessary to ensure consistency and certainty in the implementation of the BEPS Project in a multilateral context
• Countries will be able to implement some of the BEPS action plans relating to double tax treaties
• To tackle tax avoidance
• �Improve the coherence of international tax rules and ensure a more transparent tax environment
• �The MLI helps the fight against abuse of tax treaties
• Helps in implementing the tax treaty-related measures alongside existing bilateral tax treaties in a synchronised and efficient manner
• �Improve dispute resolution
• �Prevent the artificial avoidance of permanent establishment status
• �Neutralise the effects of hybrid mismatch arrangements

India and the Multilateral Convention
In 2017 India has given its approval for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. It will enable the application of BEPS outcomes through modification of existing tax treaties of India in a swift manner. It will also help in�curbing of revenue loss through treaty abuse and base erosion and profit shifting strategies.�It will ensure that profits are taxed where substantive economic activities generating the profits are carried out and where value is created.
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Topics: GS-III: Indian Economy Issues Relating to Planning