Stakeholders suggest provision for advance ruling in GAAR
The expert committee on GAAR (General Anti Avoidance Rules), set up at the instance of Prime Minister Manmohan Singh under the chairmanship of ICRIER chief Parthasarathi Shome, has begun the process of consultations with various stakeholders in a bid to fine-tune what has been hitherto been viewed as controversial provisions and usher in more clarity and transparency in the draft guidelines.
“We have already begun the consultation process quite intensively and it will be more intensified as we go ahead,” Dr. Shome said while speaking at a seminar on ‘GAAR: Bane or boon for the economy,’ organised by the Associated Chambers of Commerce and Industry of India here.
Initiated by the then Finance Minister Pranab Mukherjee, the introduction of GAAR was proposed in the Budget for the current fiscal, mainly with the objective of checking tax evasion. However, the provisions of GAAR were viewed as not only opaque and stringent but also draconian in its applicability and following stiff opposition by foreign and domestic investors and bitter criticism by global tax advisory firms, its implementation was deferred till the next fiscal beginning April 1, 2013.
Subsequently, just a day after the Finance Ministry unveiled the draft guidelines on GAAR on June 28, the Prime Minister’s Office sought to clarify that the guidelines did not have the approval of Dr. Singh and the final draft would be prepared after consultations with stakeholders.
Earlier this month, the Prime Minister constituted the expert panel headed by Dr. Shome. The committee has been asked to review the draft and prepare a set of fresh guidelines on the basis of consultations by August 31 and finalise the norms and prepare its report on a GAAR implementation roadmap by September 30.
Explaining how the expert panel would go about to achieve its task, Dr. Shome said: “We have already started meeting the advisors and there are lots of requests for presentation. The whole point of meeting the stakeholders is to see what are the legitimate and not so legitimate views. Besides, there are some issues that can come up and we have to sift through them.”
To a question on whether the committee would be able to meet the September 30 deadline for coming out with the final guidelines on GAAR, Dr. Shome said: “That is my instruction. So I am trying very hard to do that, so let’s see.”
During the discussions at the seminar, it was suggested that there should be a provision for advance ruling in GAAR where advance tax transactions can be clearly spelt out by the authorities. The Shome panel on GAAR, it was noted, should also include an independent person, preferably an economist, who would be able to comment on the “commercial substance” of transactions.
Besides, a monetary ceiling should also be specified or defined to ensure that there is clarity amid the business fraternity.