The Centre is not likely to accept the Shome panel recommendation to defer implementation of the proposed General Anti Avoidance Rules (GAAR) by three years, till April 2016. The finance ministry is not in favour of a deferral beyond April 2014. A final decision will be taken by the Prime Minister.
Budget 2012 had proposed introduction of GAAR from April 2013. Finance Minister P Chidambaram is learnt to have proposed a year’s deferment. The changes will require an amendment to the Income Tax (I-T) Act.
The ministry might shortly announce final GAAR guidelines, saying under what circumstances the rules would be invoked. Barring the time frame, most other recommendations of the Shome panel with regard to GAAR are likely to be accepted.
The ministry might dilute the I-T provisions with regard to retrospective taxation, too, but is not likely to completely toe the Shome panel’s line when the amendments to the Act are moved, presumably in the coming session of Parliament.
The Shome panel had recommended foreign companies going for mergers & acquisitions in India should pay tax only prospectively. The revenue department feels there could be some practical difficulties in fully accepting the recommendations on both retrospective taxation and GAAR.
“I have finalised the amendments to Chapter 10A of the I-T Act. Now, it will go to the Prime Minister’s Office and then we should be ready with the amendments and then the GAAR rules will reflect the amended Chapter 10A. That is under preparation and I think the work is almost complete. So, GAAR is under control. I have taken the decisions, subject to the PM’s approval and then the Cabinet,” Chidambaram told PTI last week.
GAAR was announced by the government to check tax avoidance by companies routing their investments into India through tax havens.