New Delhi, June 29 (IBNS): Indian government released the draft guidelines on the General Anti-Tax Avoidance Rules (GAAR) on Thursday though it will be finalised only after receiving Prime Minister Manmohan Singh's approval on the matter.
GAAR is a measure targetted at tax evaders, and it aims at preventing Indian companies and investors from routing investments through Mauritius or other tax havens to escape payment of taxes.
The government clarified on Friday that the GAAR guidelines are only 'Draft Guidelines' that have been released for receiving wide-ranging feedback and discussion on the issue.
The government said it will be finalised only after Prime Minister Manmohan Singh, who also holds the Finance portfolio, gives approval to it after considering the feedback received on the matter.
"The GAAR guidelines that have been put up on the government website from the official level of the Finance Ministry and shared with some stakeholders are only Draft Guidelines and have been put out for receiving wide-ranging feedback and for discussion purposes only," read a government statementon Friday.
"These have not been seen by the Prime Minister and will be finalised with the approval of the Prime Minister, who holds the Finance portfolio, only after considering the feedback received," a government statement said on Friday.
The GAAR was introduced in this year budget.
Meanwhile, the 30-stock BSE Sensex on Friday crossed 350 points and traded above the 17,000 mark following news of the European leaders agreeing to create a single supervisory body for euro zone banks and the GAAR draft guidelines announced the night before.
The Nifty index also rose above the 5,250 mark, to gain 100 points.
The 2 percent jump in Sensex is the highest since May 2.
The new Draft guidelines regarding implementation of General Anti Avoidance Rules (GAAR) in terms of section 101 of the Income Tax Act, 1961 announced Thursday also boosted the domestic market.
The draft guidelines regarding implementation of General Anti Avoidance Rules (GAAR) in terms of section 101 of the Income Tax Act, 1961 was released by the Finance Ministry on Thursday.
"The Chairman, CBDT......Dated 27 February, 2012 constituted a Committee under the Chairmanship of the Director General of the Income Tax (International Taxation) to give recommendations for formulating the guidelines for proper implementation of GAAR Provisions under the Direct Tax Code Bill, 2010 and to suggest safeguards to these provisions to curb the abuse thereof," read the government statement.
"Foreign Institutional Investors have expressed certain concerns regarding GAAR provisions. The committee met the representatives of Asia Securities Industry & Finance Markets Association and Capital Markets Tax Committee of Asia. After discussions, the representatives of these bodies gave following suggestions to resolve their apprehensions," it said.
"Where a Foreign Institutional Investor (FII) chooses not to take any benefit under an agreement entered into by India under section 90 or 90A of the Act and subjects itself to tax in accordance with the domestic law provisions, then, the provisions of Chapter X-A shall not apply to such FII or to the non-resident investors of the FII," it said.
"Where an FII chooses to take a treaty benefit, GAAR provisions may be invoked in the case of the FII, but would not in any case be invoked in the case of the non-resident investors of the FII," it said.
"The provisions of GAAR will apply to the income accruing or arising to the taxpayers on or after 01.04.2013," it said.