Chidambaram: Action time
New Delhi, Oct. 1: The final guidelines on General Anti-Avoidance Rules (GAAR) may be out in another 20 days, which is the time the government will take to study the recommendations of the Shome panel, finance minister P. Chidambaram said today.
A committee headed by tax expert Parthasarthi Shome submitted its final report on GAAR today.
The panel also gave the finance minister a draft report on retrospectively taxing overseas deals involving local assets. Chidambaram said this report could be made public in 10 days.
“As soon as I read it and my department reads it, we will put it on the website, invite comments and give about 15 days for feedback and then we will examine. We will have to read it carefully,” the minister said. The report on retrospective taxation will, therefore, be separate from the GAAR report.
Chidambaram did not give the details of the Shome committee report on GAAR, but indications were that of the final version being similar to the version that suggested watering down some rules and deferring the implementation for three years.
The committee had in its draft report recommended postponment of the controversial tax provision by three years to April 1, 2016, and the abolition of capital gains tax on the transfer of securities.
It said GAAR should not be invoked to examine the genuine residency of entities in Mauritius. After the rules are finalised, the income tax act will be amended if necessary, Chidambaram said.
“If it is necessary to amend the income tax act, I am afraid it will certainly take longer because that has to go to the cabinet and the act has to be amended,” he said.
Prime Minister Manmohan Singh had appointed the Shome panel in July, when he was holding the finance portfolio, to recommend measures to allay investor concerns.
The government had to defer the implementation of GAAR, introduced by Pranab Mukherjee in his 2012-13 budget to check tax evasion.
The Shome committee has called GAAR “an extremely advanced instrument of tax administration — one of deterrence, rather than for revenue generation” for which, it said, intensive training of tax officers who would specialise in the finer aspects of international taxation was needed.
It recommended a grandfathering clause to protect existing investments and providing protection for transactions routed through Mauritius, with which India has a double taxation avoidance treaty.