In a move that is likely to soothe anxious investor nerves, the government on Monday said it will come out with its final guidelines on the controversial General Anti Avoidance Rules (GAAR) later this month.
GAAR, first proposed in this year’s budget and later deferred by a year, seeks to empower taxmen to clampdown on deals suspected to have been structured only to avoid paying taxes.
The final guidelines will draw upon the recommendations of a panel headed by Parthasarthi Shome, head of think-tank Indian Council for Research in International Economic Relations.
The Shome-panel submitted its final report to the finance ministry on Monday amid speculation that it has proposed deferring the implementation of GAAR by three years to 2016.
“I expect Stage 1-finalisation of our views on the report to take place in next 10 days,” said finance minister P Chidambaram. “Stage 2 — the final GAAR rules — would take another 10 days because that would require vetting by the law ministry... “So, at the moment, I would like to complete Stage 1 and Stage 2 ... that would be (done) by the month end.”
Any decision to amend the Income Tax Act, if necessary, will be taken after the government issues the guidelines on GAAR.
“The third stage if it is necessary to amend the IT Act, I am afraid it will certainly take longer because that has to go to Cabinet and the Act has to be amended,” said Chidambaram.
The Shome-panel has also submitted its recommendations on the Finance Act that allows retrospective tax on global mergers including Vodafone’s 2007 acquisition of Hutchinson’s mobile assets in India.