GAAR panel to streamline draft guidelines, trim illustrations

A committee set up by the finance ministry to look into ways of modifying the General Anti Avoidance Rules (GAAR) has decided to modify the draft guidelines through a reduction in the number of illustrative examples.

While it has not yet decided on the maximum number of illustrative examples, the GAAR committee, which met today, said some illustrations will be reduced while some others will be combined to give it better direction.

The draft guidelines, proposed by former finance minister Pranab Mukherjee has provided 21 examples to illustrate the applicability or non-applicability of GAAR, which made the rules too vague for the taxpayers.

Finance ministry officials, meanwhile, also met tax consultants to hold discussions on the GAAR and the general consensus is that while the industry may be ready for GAAR by April 2013, there is a need for working out ''permissible arrangements'' rather than fixing a ceiling on the trigger limit for GAAR.

Last week, the finance ministry had also discussed the issue with Mauritian foreign minister Arvin Boolell who raised concern over India's proposals to bring domestic laws like GAAR.

While the GAAR, announced in the union budget, was meant to stem tax evasion by routing investments through tax havens like Mauritius, it has also dawned on the FDI-hungry government that GAAR, in fact, retarded foreign investments in the country.