Comments
In a bid to allay fears of foreign investors and boost sagging FDI inflows, the Government has once again put off the implementation of the unpopular General Anti-Avoidance Rules (GAAR) by two more years.
At the same time, it also announced that the Rules will not be invoked against non-resident Indians who invest in registered foreign institutional investors (FIIs). While it is not clear whether investment through Participatory Notes (PNs) will come under the anti-avoidance regime, some experts believe it will not.
The Government will introduce an amendment to income-tax law to give statutory effect to the latest decisions that seek to modify the proposed tax regime. After this, new rules will be announced for implementation of GAAR. The provisions introduced by then Finance Minister Pranab Mukherjee in the Budget for 2012-13 were aimed at checking tax avoidance by overseas investors.
Finance Minister P. Chidambaram announced: “Having considered all the circumstances and relevant factors, the Government has decided that the provisions of Chapter X-A (read provisions for GAAR) will come into force with effect from April 1, 2016, against the current provision of April 1, 2014.” This decision follows the recommendations of the Shome Committee, set up by Prime Minister Manmohan Singh last July to look into investor concerns. “No investors should have any apprehension about their investments in India,” Chidambaram said, adding that the GAAR provisions strike a balance between the Government’s need for revenue generation and investors’ interests. All the fears should be set aside, the Minister added. Only those arrangements that have been made for the purpose of tax avoidance will be brought under GAAR, he said.
Under the new norms, the Government has set a cut-off date. “Investments made before August 30, 2010, the date of introduction of the Direct Taxes Code, Bill, 2010, will be grandfathered,” he said. It means that such foreign investments will not come under the provisions of GAAR. At the same time, investment made on or after September 1, 2010 and till March 31, 2016 may attract GAAR provisions until they are compliant, according to new provisions.
On whether tax officials can look into cases between August 30, 2010 and the date for GAAR implementation, Chidambaram said: “That they can go back is technically correct. But for that, you have to comply with a number of provisions in the I-T Act. If the assessment is completed, you can reopen the assessment only under very strict circumstances.”
Following the announcement by the Finance Minister, the Sensex gained 242 points to end at 19,906.41.
Shishir.Sinha@thehindu.co.in
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.