CII strongly resents introduction of GAAR; suggest its deferral till 2018

Blaming the current guidelines being subjective and prone to misuse, the Confederation of Indian Industry (CII) has strongly resented the introduction of the controversial General Anti-Avoidance Rules (GAAR) in the current business environment. In the representation on the draft guidelines, which would be submitted to the government on August 7, the apex business chamber opines that this is not the right time to introduce GAAR in the Income Tax Act, and only after the government can assure a transparent, non-corrupt and fair tax administration should GAAR be introduced. Highlighting the need to invite foreign capital into India to bring growth back to our country, the industry body has further suggested GAAR to be deferred to April 1, 2018, if not being completely set aside.

Both foreign as well as domestic investors have been in a tizzy ever since the introduction of GAAR, in mid-March as part of the budget for fiscal 2013. However, the chamber in order to revive investor confidence in India, suggested that GAAR should avoid overriding tax treaties except in rare cases, and only after an independent, high-powered committee constituted for the purpose has given its consent. The industry body also wants adequate safeguards to ensure that GAAR is not used as a tool only for checking tax avoidance & evasion and not collecting additional tax.

In a recent development for fine tuning the controversial GAAR policy, Prime Minister-appointed expert committee initiated the consultation process with various stakeholders to usher in greater clarity and transparency in the draft norms.

Earlier this month, Prime Minister Manmohan Singh appointed a four-member committee headed by noted economist and tax expert Parthasarathi Shome to rework on GAAR. A new panel led former adviser to the finance minister during P Chidambaram’s tenure between 2004 and 2008, will prepare a road map on GAAR by September 30.  The Shome committee after reading and vetting the responses to the draft guidelines that the finance ministry has put out on June 28, will draft second GAAR guidelines by August 31, which would be submitted along with its road map for implementation by the end of September.