Union Government confirms, GAAR will be effective from April 1, 2017

TNPSC Current Affairs January 29 2017

Union Finance Minister, Arun Jaitley  has confirmed that General Anti-Avoidance Rules (GAAR) will implement from April 1, 2017

GAAR (General Anti-Avoidance Rules) are the set of rules framed to check the avoidance of Tax.

Why GAAR?

GAAR will give more powers to the Tax department to deny double taxation treaty benefits to foreign funds routing from Tax-havens like Mauritius .If the bill is passed foreign institutional investor domiciled in such treaty locations has to prove that thy created this structure for genuine business purposes and not for avoidance of tax.

Background:

In June 2012, then finance minister Pranab Mukherjee released the first GAAR Draft, which was in wide criticism. Then Prime Minister Manmohan Singh formed review committee under Parthasarthi Shome. Shome recommended to postpone GAAR for three years and recommends more ininvestor friendly measures.

In 2013 government of India partially accepted Shome Recommendation and defer the GAAR by 2 more years will be effective from 2016-2017.

Australia has introduced this rule in 1981 and later Singapore, Canada, France, south Africa etc introduced GAAR. However UK and USA introduced with much more cautious and not much aggressive in GAAR.