New Delhi, June 28: The finance ministry today proposed a monetary limit to invoke the controversial General Anti-Tax Avoidance Rules (GAAR) in its draft guidelines on implementing the rules issued late in the night.

Although the draft did not specify the monetary limit, it said deals over a prescribed limit should be covered by GAAR provisions.

The guidelines said GAAR provisions would be invoked only in cases where FIIs chose to take the benefit of double tax avoidance treaties.

“Where an FII chooses to take a treaty benefit, GAAR provisions may be invoked in the case of the FII, but would not in any case be invoked in the case of the non-resident investors of the FII,” the draft guideline said.

The provisions, it said, would apply only to the income arising to taxpayers on or after April 1, 2013.

The guidelines has proposed time limits for the completion of various actions under GAAR.

The CBDT also called for setting up a panel of not less than three members that would approve cases that could come under the ambit of GAAR. In the beginning, there will be one such panel based in Delhi.

Finance secretary R.S. Gujral said the draft rules would cover the general anti-avoidance rules, which target companies and investors that route investments through tax havens such as Mauritius.

Earlier in the day, Gujral had said the finance ministry would provide clarifications to the Prime Minister’s Office in two to three weeks on all tax issues, including the retrospective tax amendment that requires Vodafone to pay a tax of Rs 20,000 crore.

“The Prime Minister’s Office has sought clarifications on taxation issues and Section 9 of the Income Tax Act (related to tax on indirect transfer of assets).... We asked them to give us two to three weeks time,” Gujral had said.

The GAAR rules sparked controversy when they were introduced in March, as economists and investors said the wording was vague, creating uncertainty at a time when the country needed capital to help to plug a widening current account deficit.

Foreign investors feared the government would use the rules to target portfolio investments routed through countries that have a double tax avoidance treaty with India, such as Mauritius.

Then finance minister Pranab Mukherjee sought to placate investors in May by deferring GAAR until 2013.

An apex body for administration of taxes had formed a six-member committee to draft guidelines for enforcing GAAR, introduced in the Union budget to crack down on tax cheats.

Another issue that had displeased investors was a proposal to give the government power to retrospectively tax investments as in the Vodafone case.

In a closed door meeting today with Montek Singh Ahluwalia, deputy chairman of the Planning Commission, Analjit Singh, chairman of Vodafone India, discussed the possibility of an out of court settlement on the Rs 20,000-crore tax demand, said sources.

They said Vodafone was willing to pay tax of Rs 8,000 crore and had sought a waiver of penalties and interest.

Singh later said the government had assured it of a “level playing field” and had asked it to stay invested in the country. Sources said the income tax department was unlikely to issue any fresh notice soon to Vodafone.