FinMin seeks suggestions on GAAR guidelines

Ministry asks stakeholders to provide particular provision and apprehensions or doubt in relation to tax avoidance structure

The finance ministry has begun consultations with business on the General Anti-Avoidance Rule (GAAR), to be implemented from the next financial year.

To take the industry’s concerns on board, the ministry will come out with guidelines on these rules.  The ministry on Friday invited comments from stakeholders on the guidelines by June 30.

“Several stakeholders and industry associations have represented that guidelines for implementation of GAAR be issued, so that there is adequate clarity in this regard. The general public and stakeholders are, therefore, requested to provide their inputs on the provisions in respect of which further clarity is required, from its implementation perspective,” the ministry stated.

It also asked the stakeholders to avoid reference to hypothetical situations. “If the input relates to interpretation of a specific real world structure or arrangement, the structure should be such (which) commonly occurs in the sector and involves clarification of general principles of application.”

The ministry has asked the stakeholders to provide the particular provision and apprehensions or doubt in relation to such structure.

GAAR norms were originally proposed in the almost-junked Direct Taxes Code. Then finance minister Pranab Mukherjee had proposed it in Budget 2012-13. However, business lack of preparedness and  proposed implementation of Base Erosion and Profit Shifting by Organisation for Economic Co-operation and Develo-pment member nations led to GAAR’s deferment till the next financial year. GAAR can override tax treaties as well.

In response to a query as to what would be his feedback if he were to give inputs, Amit Maheshwari, managing partner of Ashok Maheshwary & Associates, said GAAR should not override tax treaties. “Nowadays, tax treaties have a clause of limitation of benefits. Tax treaties should be re-negotiated, rather than be overridden by GAAR,” he said.

Sunil D Shah, partner, Deloitte Haskins & Sells, said: “It is expected that more clarity will be available once the guidelines are framed setting out what types of arrangements would be impacted by the GAAR provisions. This will enable businesses to better plan their transactions.”