Economy

Finance Ministry may modify GAAR guidelines based on stakeholders’ views

Our Bureau New Delhi | Updated on March 12, 2018 Published on July 09, 2012

The final guidelines on the General Anti-Avoidance Rules (GAAR) may tone down some of the provisions mentioned in the draft guidelines. The Finance Ministry held the first meeting on the draft guidelines on Monday. GAAR, as proposed in the Budget, is to be implemented from April 1, 2013.

The Monday meeting, chaired by the Finance Secretary Mr R.S. Gujral, was called to take views from the stakeholders. Although Mr Gujral refused to comment on the proceedings of the meeting, those who attended said that the meeting concentrated mainly on examples. There will be another round of meeting between August 10 and 12.

The draft guidelines have a total of 21 examples. These examples illustrate cases where GAAR provisions would be considered applicable or not applicable. According to a source, “We are getting a sense that some of the examples may be taken out, some will be merged and new ones added.”

The feeling is that everything will be substance over form, he said. Another person, who attended the meeting, claimed that there might be reconsideration on example numbers 3, 11 and 16.

Meanwhile, the Indian Private Equity & Venture Capital Association, in the meeting, suggested three tests to ‘judicially recognise’ potential indicator of substance, which if fulfilled should not trigger GAAR provisions and lead to denial of treaty benefits. These three tests are expenditure, employee and residency.

“They (GAAR sub-committee) welcomed our suggestions. The question now is whether one of the three tests, or two, are necessary to qualify as a legitimate resident,” said Mr Mahendra Swarup, President of the association.

The Finance Ministry issued the draft guidelines on June 28. It has invited comments or suggestions till July 20. However, there was confusion as the Prime Minister’s Office issued a statement the very next day saying that the guidelines were not seen by the Prime Minister, who holds the Finance portfolio, and would be finalised with hisapproval only after considering the feedback received.

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Published on July 09, 2012
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