Monday, January 14, 2013

Govt postpones GAAR implementation by 2 years to 2016

Giving a big relief to overseas investors, the government has postponed implementation of controversial GAAR provisions by two years to April 1, 2016.

"Having considered all the circumstances and relevant factors, the government has ...Decided that provisions of Chapter 10A of the Income Tax Act (dealing with GAAR) will come into force from April 1, 2016 as against April 1, 2014," Finance Minister P Chidambaram said.


The General Anti Avoidance Rules (GAAR) provisions, introduced by the then Finance Minister Pranab Mukherjee in the Budget 2012-13, were aimed at checking tax avoidance by overseas investors. The proposal, however, generated controversy, with investors expressing apprehensions that it would result in unnecessary harassment by tax authorities.

The decision to postpone the implementation, Chidambaram said, follows the recommendations of the Shome Committee which was set up by Prime Minister Manmohan Singh in July last year to look into investor concerns.

The government, Chidambaram further said, has accepted major recommendations of the panel with some modifications.


The GAAR provisions, the Minister also clarified, would override the double taxation avoidance agreement (DTAA) benefits if the arrangements were intended solely to evade taxes.

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