India would finalize the guidelines on its controversial anti-avoidance law within 20 days after considering the recommendations made by a government panel, ending months-long stalemate on the issue, Finance Minister P Chidambaram said Monday.
The Parthasarathi Shome committee, looking into the taxation issues relating to the GAAR (General Anti-Avoidance Rules), submitted its final report to the government Monday. The committee was appointed by Prime Minister Manmohan Singh after investors had expressed apprehensions on certain provisions of the GAAR which included retro-taxing.
“I expect Stage 1-finalisation of our views on the final report (by the Shome panel) to take place in next 10 days. Stage 2-the final GAAR rules would take another 10 days because that would require vetting by the Ministry of Law. So at the moment, I would like to complete Stage 1 and Stage 2 … That would be (done) by the end of this month,” Chidambaram told reporters in New Delhi, Reuters reported.
He said that the Income Tax act might be amended to comply with the panel’s recommendations.
The GAAR was initiated in March by the then finance minister and the present President of India, Pranab Mukherjee, to prevent tax evasion by the companies by routing their investments through tax havens like Mauritius. However, the ambiguity in the laws had resulted in hurting the investor confidence, leading to a huge foreign fund outflow which damaged the markets and economy.
Though Chidambaram did not elaborate on the new report, ET Now TV channel said that new guidelines would be softer on the investors and some of the key rules that triggered global resistance from the investors had been watered-down.
The panel submitted a draft report on the issue of retro-taxing on certain overseas deals. The government had passed the act to retrospectively tax such deals after a dispute involving Vodafone in which the Supreme Court had ruled that the company did not have to pay the tax in India for an $11-billion deal involving the sale of Indian assets to a Hong Kong-listed company.
The retro-taxing was seen as an attempt to target Vodafone, which was asked to pay $2.2 billion from the deal.