Finance Minister Arun Jaitley reiterated on Monday a commitment to implement General Anti Avoidance Rules (GAAR) from April 1, 2017, a promise that should please foreign institutional investors who will have clarity on the government’s plans of taxing indirect transfers.
GAAR, a controversial system that seeks to empower taxmen to clampdown on deals and income suspected to have been structured to avoid paying taxes, was scheduled to be implemented from April 2015 but was deferred.
It was initially included in the Income Tax Act in 2012 but implementation was postponed after opposition from foreign investors.
“I would like to reiterate our commitment to implement General Anti Avoidance Rules (GAAR) from 1.4.2017,” said Finance Minister Arun Jaitley on Monday presenting Budget for 2016.
A committee set up by the government, headed by tax expert Parthasarathi Shome, had submitted two reports in 2012— on GAAR and retrospective amendments relating to indirect transfers.
The government has deferred GAAR but it will apply to investments made on or after April 1,2017, when implemented. “This is likely to align Indian tax laws with legislation of Base Erosion and Profit Shifting (BEPS) action plans,” said Naveen Aggarwal, Partner - Tax, KPMG in India.