GAAR likely to be deferred by 2 years
Announced as part of Budget 2012-13 by former finance minister Pranab Mukherjee, GAAR was intended to check tax avoidance by multi-national firms that use tax havens to route their investments into India.
But the controversial tax law had raised the hackles of foreign as well as domestic investors who felt that it may give unrestrained powers to tax authorities and was put on hold till April 1, 2013. Registration by FIIs with the market regulator had fallen for the first time in a decade in calendar year 2012.
The Shome committee was set up by Prime Minister Manmohan Singh to review the proposal.
The panel submitted its report on October 1.
"GAAR is clearly not a revenue raising measure and its roll out at this stage would dampen the improving investor sentiments. Further, since it is a sophisticated tax legislation, both the revenue officials as well as taxpayers need to understand and absorb it before rushing into it," said Sudhir Kapadia, partner and national tax leader at Ernst and Young.
* Parthasarathi committee had earlier suggested postponing the implementation of the proposal to 2016-17
* The government is also likely to accept the suggestion that GAAR should kick in only in cases where the tax benefit is over Rs 3 crore.
* Registration by FIIs with Sebi had fallen for the first time in a decade in calendar year 2012
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