Amendments to GAAR, the controversial law against tax avoidance through foreign investments, have been finalised, Finance Minister P Chidambaram disclosed today.

“I have finalised the amendments to the Chapter 10A of the Income Tax Act. Now it will go to the PMO and then we should be ready with the amendments and then the GAAR rules will reflect the amended Chapter 10A.

“That is under preparation and I think the work is almost complete. The drafting work is complete. So, GAAR is under control. I have taken the decisions, subject to Prime Minister’s approval and then Cabinet,” he said in an interview.

Chapter 10A of the Income Tax Act deals with taxation of investments.

GAAR (General Anti-Avoidance Rules), which was proposed in 2012-13 budget with a view to preventing tax evasion, evoked sharp reactions from foreign as well as domestic investors who feared that unbridled powers to taxmen would result in harassment of investors.

The government later appointed a committee headed by tax expert Parthasarthi Shome to look into their concerns.

Chidambaram, during the interview, spoke on a variety of subjects including his optimism on meeting disinvestment and spectrum sales target, confidence on pushing through with reforms measures and the relationship with RBI which he said was not antagonistic.

On the issue relating to retrospective tax amendment on which the Shome Committee had submitted its report, he said: “The CBDT (Central Board of Direct Taxes) has given its views. I have taken decisions at my level. The drafting is going on. Again it will go to the PMO and then to the Cabinet.”

Referring to the Direct Taxes Code (DTC), a bigger matter, he said, “We have now started work. This morning I spent two hours on that. Earlier I had spent several hours. We are looking at it. We have tabulated it...will take final decision.”

Chidambaram said that government was keen to get the investment engine going and measures were being taken by the government to create a “better climate”.

Optimistic that the economy will still clock 5.5 to 6 per cent growth in the current fiscal, he said public sector undertakings have been put on notice to invest their surplus or be prepared to lose it while industrial houses will be “goaded” to invest.

“Today there is reluctance to invest because they (industry) perceive a number of hurdles to investment. They also don’t see the economic situation very propitious or conducive for investment.

“I think some steps we took in September have broken this wave of fear but some part of it is still there. We have to now get down to the detail, get each PSU (Public Sector Undertaking), each sector, each business house why are you not investing. Invest. That is the effort,” he said.

Chidambaram said no PSU will be allowed to fall short of its announced intention to invest. Performance of the CMDs will be measured on how much did he invest in terms of declared intention to invest.

“And now we are talking to individual business houses and goading them to invest. They are all sitting on piles of cash.

“We are also asking sectorally that what the hindrance to investment is and trying to remove those hindrances or hurdles.

“But will have to get the investment engine going,” he mentioned

“It has come to life but it is still not running at full speed. Once we get the investment engine going the results will begin to happen next year. Steel, cement will be in demand and that will drawn more investment in small and medium enterprises, ancillary industries which will bring more jobs,” he said.

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