Onus of proof on revenue department under amended GAAR

The government has proposed various amendments to the provisions relating to the General Anti-Avoidance Rules (GAAR) proposed in the Finance Bill 2012 and shifted the onus of proof from the tax-payer to the revenue department.

Under the amended provisions, the revenue department will have to produce proof of tax liability of the tax-payers before taking any action under GAAR.

The approving panel of the GAAR will have an independent member, not below the rank of joint secretary from the ministry of law, to ensure objectivity and transparency in decisions.

The amended provisions also permit both resident and non-resident tax-payers to approach the Authority for Advance Ruling (AAR) for a ruling as to whether any arrangement to be undertaken is permissible or not under the GAAR provisions.

The applicability of GAAR provisions has, however, been expended by one year, ie, until the financial year 2013-14 in order to provide more time to both tax payers and the tax administration to address all related issues, minister of state for finance, S S Palanimanickam informed the Rajya Sabha in a written reply today.

GAAR, which seeks to check tax evasion by foreign investors, will now be introduced from 1 April 2013. The finance ministry deferred the proposal to impose GAAR on following pressure from foreign investors, and the rating agencies that raked up the issue of declining FDI to lower credit rating of the government as also private entities in the country.