The Shome committee recommendations on GAAR, if accepted, will remove many hurdles that impede foreign investment in India. In the same vein, the government needs to address other important issues that are a hindrance in the path of foreign investors. The Minimum Alternate Tax (MAT) on Special Economic Zones (SEZs) introduced in Budget 2011 put off potential investors. Applying MAT effectively nullifies all tax benefits and concessions earlier promised to foreign investors for investing in SEZs. Globally, it projects India as a not so dependable investment destination having an unstable tax regime.
This refers to your editorial “Reality check on tax avoidance” (Business Line, September 4). The proposal to introduce General Anti Avoidance Rules in this year’s Budget has shaken the confidence of investors and affected the sentiments of the market. The Shome Committee’s suggestion to defer the implementation of GAAR brought a sigh of relief to the market. The move to do away with short term capital gains and enhance STT is a good suggestion. The STT can be different for purchase and sale transactions, for different volumes and for different securities. It can also be introduced for gold and silver transactions.