In a move that has brought cheers to the industry and given a boost to investment in the Indian economy, finance minister Arun Jaitley on Saturday proposed a deferring applicability of the General Anti Avoidance Act (GAAR) by two years and made it applicable prospectively.
“The implementation of the General Anti Avoidance Rule has been a matter of public debate. The investment sentiment in the country has now turned positive and we need to accelerate this momentum. There are also certain contentious issues relating to GAAR which need to be resolved. We have therefore decided to defer the applicability of GAAR by two years,” Jaitley said in his Budget speech.
He further added that “when implemented, GAAR would apply prospectively to investments made on or after 1st April 2017”.
In his speech, the finance minister chose to make himself clear for the investor by categorically saying: “It is also proposed that the investments made up to March 31, 2017 shall not be subjected to GAAR.”
The government had been thinking to defer the implementation of GAAR for quite some time now. HT was the first to report that the budget would announce a deferment of GAAR, clearing the negative air, which had been restraining investors to consider India.
“...If I bring in GAAR now with or without amendment, it will create panic in the market. This is not the stage where I can afford allowing investors to run away or investment not to come... Inadequate investment can also affect rupee-dollar parity,” Jaitley added.
GAAR is a controversial system that seeks to empower taxmen to clampdown on deals and income suspected to have been structured to avoid paying taxes.