Factbox - GAAR delay fails to soothe fears

Tue May 8, 2012 7:15pm IST

A stock broker looks at a terminal while trading at a stock brokerage firm in Mumbai November 17, 2008. REUTERS/Arko Datta/Files

A stock broker looks at a terminal while trading at a stock brokerage firm in Mumbai November 17, 2008.

Credit: Reuters/Arko Datta/Files

Related Topics

REUTERS - India has deferred by a year the rollout of measures to crack down on tax evasion, which had sparked an outcry among foreign investors, but has yet to provide clear guidelines on the proposals.

Here are some quick facts that pertain to markets about the proposed changes and clarifications on GAAR announced by Finance Minister Pranab Mukherjee on Monday.

* The General Anti Avoidance Rule, or GAAR, was proposed in mid-March as part of the budget for fiscal 2013.

* GAAR aims to target tax evaders, partly by stopping Indian companies and investors from routing investments through Mauritius or other tax havens for the sole purpose of avoiding taxes.

* However, the ambiguous language, the lack of details, and the sudden onset of the provisions have been among the factors that have upset foreign investors.

* Finance Minister Pranab Mukherjee on Monday proposed to defer the rollout of GAAR by a year to the financial year that begins in April 2013 to "provide more time" to both taxpayers and the tax office "to address all related issues".

* The finance minister proposed to remove the onus of proof entirely from the taxpayer and shift it to the revenue departments.

* A local or foreign taxpayer will also be able to approach authorities in advance for a ruling on their potential tax liabilities, Mukherjee proposed.

* An independent member would be in the GAAR approving panel, while one member would be an officer of the level of Joint Secretary, or above, from the Ministry of Law.

* A committee would be constituted under the Chairmanship of the Director General of Income Tax, with the task of providing recommendations by May 31 for formulating the rules and guidelines to implement GAAR provisions.

* On the proposed retrospective amendment in tax rules, Mukherjee said the changes will not override the provisions of double-tax avoidance treaties India has with 82 countries.

* The retroactive changes will only impact those cases where a deal has been routed through low-tax and no-tax countries with whom India does not have tax treaties.

* The proposed retrospective changes in tax rules will not be used to reopen cases where assessment orders have already been finalised, Mukherjee said.

* Mukherjee proposed to reduce long-term capital gains tax on private equity firms on the sale of unlisted securities to 10 percent, from 20 percent currently, and bring the tax rate in line with what is charged from foreign portfolio investors.

* The finance minister also proposed to cut the withholding tax to 5 percent from 20 percent currently on funding through foreign loans for "all businesses." The budget in mid-March had proposed a lower withholding tax for some sectors.

* Mukherjee proposed to extend the tax exemption on long-term capital gains related to the sale of unlisted securities in an initial public offering. The levy of the Securities Transaction Tax would be levied at the rate of 0.2 percent on the sales of unlisted securities.

(Reporting by Devidutta Tripathy and Rafael Nam)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared
BSE Sensex rises over 1 percent on reforms, election boost

BSE Sensex rises over 1 percent on reforms, election boost

The BSE Sensex and Nifty rose more than 1 percent on Monday to mark their biggest daily gain in more than one week after the government's energy reforms led to a rally in oil firms, while wins by Prime Minister Narendra Modi's party in two state elections raised expectations for additional reforms.  Full Article 

REUTERS SHOWCASE

Indian State Media

Indian State Media

Controlling the message: Modi chooses state media  Full Article 

ONGC Stake

ONGC Stake

Govt meeting bankers to discuss share sale in ONGC - source  Full Article 

Gold Curbs

Gold Curbs

Finance Ministry wants to reimpose curbs on gold imports - ET  Full Article 

World Stocks

World Stocks

Shares advance on strong data, earnings  Full Article 

IBM Chip Unit

IBM Chip Unit

IBM to pay Globalfoundries to take chip unit  Full Article 

Eyeing Reebok

Eyeing Reebok

Investor group aims to buy Reebok unit - WSJ  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage