Govt May Reschedule GAAR to Enhance Business Sentiment

BANGALORE: The government is likely to rechedule implementation of the controversial GAAR provisions by one more year to April 2017 and exempt transactions made up to March 2013 in a bid to develop business sentiment.

The government earlier proposed imposing the General Anti-Avoidance Rules (GAAR) from April 1, 2016, for those claiming tax benefit of over Rs 3 crore. The rules are aimed at minimising tax avoidance for investments made by entities based in tax havens.

The Finance Ministry, which is preparing the budget for 2014-15, is considering deferring implementation of GAAR by one year with a view to improve business sentiment and promote investments and growth, official sources said.

As per the new proposal, investments made after March 2013 will be covered under GAAR with effect from assessment year 2017-18.

The sources said the benefits of grandfathering, or exemptions, would be made for business arrangements entered into up to March 2013 and not August 2010 as notified earlier.

Per the existing GAAR notification, investments made up to August 30, 2010, were not to be scrutinized.

"Tax department needs to work further on GAAR provisions and realign some of the regulations," a source said.

The current provisions apply only to foreign institutional investors (FIIs) that have claimed benefits under a Double Tax Avoidance Agreement.

Investments made by a non-resident by way of offshore derivative instruments or P-Notes through FIIs will not be covered by the GAAR provisions.

Also Read:
Price Rise of Food Commodities; Inflation hikes to 6.01 per cent in May
Most Expensive Houses In The World