Final GAAR report submitted; Chidambaram speech soon

The Parthasarathi Shome committee set up to re-examine the General Anti-Avoidance Rules (GAAR) proposed by former finance minister Pranab Mukherjee in this year's budget has reportedly presented its final recommendations to current finance minister P Chidambaram today.

According to NDTV, the panel's final report is likely to be made public tomorrow (Thursday), and Chidambaram may address a press conference in this regard. A meeting on GAAR is likely today as the finance minister is leaving for a bilateral meeting in South Korea and then for a G20 meet in Mexico tomorrow.

The panel's final suggestions are said to be largely in line with its draft report, already made public earlier this month. A major point is that the new tax rules should be applied only to future indirect asset transfers; but if at all the government decides to levy such taxes retrospectively, interest and penalty should be waived. In any case retrospective tax should be charged only in the rarest of rare cases, it has said.

The report has called for an amendment to the Finance Act, 2012, to incorporate its recommendations.

While presenting the draft report, Shome had advised that anti-tax avoidance measures such as GAAR should be used sparingly and not as a means to raise revenue for the government. "We see GAAR as a very, very special instrument for controlling tax avoidance ... we have to protect our revenue, but we cannot seek to expand our revenues with these kind of anti-avoidance methods,'' he said.

The GAAR method was first proposed in the union budget presented by Mukherjee in March 2012 to prevent tax evasion, partly by stopping Indian companies and investors from routing investments through tax havens for the sole purpose of avoiding taxes. But after a storm of global protest against retrospective application of such rules, Mukherjee deferred the proposal to April 2003.