New Delhi: The provisions of General Anti Tax Avoidance Rules (GAAR) should be ‘intelligently’ applied, said the Chairman of Expert committee, Parthasarathi Shome, after submitting the draft report to Finance Ministry.
“GAAR should be intelligently applied…some times there are areas of subjectivity so you limit them, truncate them and define them to the extend feasible,” Shome told a private news channel.
The committee, which was set up by Prime Minister Manmohan Singh in July to address concerns of foreign and domestic investors on GAAR, also emphasised the need for having an internationally comparable tax administration in India.
“We have to be internationally comparable in benchmarking various international tax mechanism. Even in tax administration, we have to become internationally comparable,” Shome added.
As a step towards reassuring global investors, the committee in its first draft report today recommended
postponement of controversial tax provision by three years and abolition of capital gains tax on transfer of securities.
It also suggested that GAAR provisions should not be invoked to examine the genuineness of the residency of entities in Mauritius.
Mauritius is the most preferred route for foreign investments because of the liberal taxation regime in the island country. India has a double taxation avoidance treaty with Mauritius.
Moreover, the Committee has recommended that GAAR should be applicable only if the monetary threshold of tax benefit is Rs 3 crore and more. The report has sought comments from the stake holders by September 15.
Meanwhile, the Finance Ministry also expanded the scope of the terms of reference of the committee to include all non-resident tax payers instead of only FIIs.
In view of wide-spread concerns by foreign investors, the government had earlier postponed implementation of GAAR, which was introduced by the then Finance Minister Pranab Mukherjee in his Budget for 2012-13 to check tax evasion.