PM Distances Himself From GAAR Guidelines

Prime Minister Manmohan Singh has distanced himself from the draft guidelines on the General Anti Avoidance Rules (GAAR) released by the revenue department late Thursday evening, saying these have been put out at the official level and are only meant for consultations and stakeholder feedback.

"These (draft guidelines) have not been seen by the Prime Minister and will be finalised with the approval of the Prime Minister, who holds the Finance portfolio, only after considering the feedback received", Prime Minister's Office (PMO) said in a release.

The Finance Ministry last evening had issued draft guidelines on GAAR - a budgetary proposal to check tax evasion - to seek feed back of the stake holders.

The draft guidelines seek to address the concerns of the investors over misuse of the tax proposal. Besides other things, it said that there would be a threshold limit for invocation of GAAR and it would apply on income accruing after April 1, 2013.

In view of the widespread protest against the proposal, former Indian Finance Minister Pranab Mukherjee postponed its implementation by a year to April 2013.

FinMin Proposals
The Finance Ministry on Thursday proposed a monetary limit for invoking the controversial General Anti-Tax Avoidance Rules (GAAR) in its draft guidelines issued late in the night.

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

The guidelines further said that GAAR provisions would be invoked only in cases where FIIs choose 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 will apply only to the income arising to taxpayers on or after April 1, 2013. The draft guidelines also proposed setting up a three-member Approving Panel to decide whether a particular case would attract the provisions of the GAAR.

The guidelines has proposed time limits for completion of various actions under the GAAR. The GAAR provisions were proposed by former Finance Minister Pranab Mukherjee in his budget to prevent tax evasion.

The provisions, however, invoked sharp criticism from the foreign and domestic investors, following which the government constituted a high-level committee to look into their concerns.

The committee, which is headed by Director General of Income Tax (international taxation), looked into the concerns of the investors and came out out with draft guidelines to seek comments of the stakeholders.

"We have finalised the GAAR draft rules after three meetings with the stakeholders. The draft will have examples for what would be deemed as permissible and impermissible arrangement," Finance Secretary R S Gujral had said earlier in the day.