FM defers GAAR by a year, allays market concerns | business | Hindustan Times
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FM defers GAAR by a year, allays market concerns

business Updated: May 08, 2012 00:14 IST
HT Correspondent
HT Correspondent
Hindustan Times
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Finance minister Pranab Mukherjee has deferred the introduction of the controversial general anti-avoidance rule (GAAR) that seeks to empower taxmen to clamp down on deals and income, if they believe that these transactions were structured in a particular way only to avoid paying taxes.


"To provide more time to both taxpayers and the tax administration to address all related issues, I propose to defer the applicability of the GAAR provisions by one year," Mukherjee said in the Lok Sabha initiating the debate on finance bill 2012. "The GAAR provisions will now apply to income of financial year 2013-14 and subsequent years."

GAAR can also potentially affect individuals if tax inspectors conclude that their remuneration has been structured in a particular way only to avoid paying taxes.

Mukherjee modified the rule placing the onus on the tax authorities to prove that a transaction or income has been structured to avoid taxes, unlike the original budget proposal which had fixed the responsibility on the taxpayer.http://www.hindustantimes.com/Images/Popup/2012/5/08_05_12-buss23.jpg

He also said the proposed retrospective amendment in the I-T Act would not override the provisions of the Double Taxation Avoidance Agreement (DTAA) which India has with 82 countries.

"It would impact those cases where the transaction has been routed through low tax or no tax countries with whom India does not have a DTAA," he said, adding that taxmen will not reopen any cases where assessment orders have already been finalised.

It was still unclear on how Vodafone, which is involved in a five-year old tax dispute with the government for its 2007 deal to acquire Hutch's mobile assets in India, will be impacted by this.

"The aspect which is more relevant to Vodafone is the announcement that the retrospective amendment will not impact cases where the assessment is completed," said Percy Billimoria, senior partner, AZB and Partners.