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Singapore investors seek more clarity on GAAR

PTI Singapore | Updated on March 09, 2013

Investors in Singapore are concerned over the pending implementation of India’s General Anti-Avoidance Rule (GAAR) and its impact on investments there.

According to legal and tax executives, they were seeking more clarity on GAAR at a seminar here on the Indian Budget for 2013-14.

“While the deferment (of GAAR)...has definitely lifted market sentiment, the ambiguity regarding whether the GAAR framework would override the India-Singapore Double Taxation Avoidance Agreement (DTAA), has left our Singaporean clients in the lurch,” said Shwetambari Rao, Partner at the Bangalore-based Krishnamurthy & Co.

The investors, including MNCs, are concerned about the GAAR impact on the investments, both those already committed and those to be made in the future, said Gagan Malik, Director, International Tax Services at Ernst & Young Solutions LLP in Singapore.

The investors were concerned about “Grandparenting” or back-dating the taxes, he said.

According to experts, the investors were monitoring the Vodafone case related to GAAR, where move to back-dating of taxes had made them “uncomfortable’’.

The UK-based Vodafone was slapped with around $2-billion tax demand notice by the Indian authorities for buying Hong Kong-based Hutchison’s telecom business that involved substantial Indian assets.

Aimed at preventing tax evaders from routing investments through low tax jurisdictions, GAAR rules have been criticised for being poorly drafted and causing widespread uncertainty for investors, PricewaterhouseCoopers Services LLP said.

Presenting the Budget on February 28, Finance Minister P. Chidambaram had said that the modified version of the GAAR provisions will come into effect from April 2016.

Although the delay in implementation of GAAR has brought some relief, investors would have to prepare their taxation system by 2015, which was not far away, said Krishnamurthy & Co’s senior lawyer Rahul Singh Talwar.

He said, however, that the Indian Government was aware of the steps taken by Singapore to differentiate itself from tax havens and keep in mind the growing commercial relationship between the two countries.

GAAR and its impact on the investments were some of the highlights of discussions at the three seminars on the Indian Budget held here this week, aiming to explain the benefits for foreign investments in India in the coming year.

Published on March 09, 2013

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