The expert committee on GAAR (the General Anti-Avoidance Rules), headed by Parthasarathi Shome to address the concerns of foreign and domestic investors, has recommended postponement of the controversial tax provision by three years and abolition of capital gains tax on transfer of securities.
In its draft report submitted to the Finance Ministry, which has been put in public domain for a fortnight for comments from stakeholders, the committee advocated that the GAAR provisions should not be invoked to examine the genuineness of the residency of investor entities in Mauritius. This single step by itself is expected to revive the flow of foreign capital from the island nation, which offers a liberal taxation regime, and where foreign institutional investors enjoy the benefits of a double taxation avoidance treaty it has with India. The committee has suggested that GAAR be applicable only if the threshold of tax benefit is Rs. 3 crore and above. It has sought comments from all stakeholders by September 15 to draw up the final guidelines.
Meanwhile, the Finance Ministry has expanded the scope of the terms of reference of the committee to include all non-resident taxpayers instead of only FIIs.
