Invoke either GAAR or principal purpose test: Asifma tells Centre

One way to address treaty abuse is to insert a PPT rule in double taxation avoidance agreements

Asia Securities Industry & Financial Markets Association (Asifma), an independent regional trade association with over 100 member firms, has asked the government to ensure that taxpayers were not subjected to both the principal purpose test (PPT) and the general anti-avoidance rule (GAAR).

The principal purpose test is an anti-abuse provision, which is part of a multilateral instrument (MLI) and has been adopted by more than 70 countries, including India. 

According to the industry body, taxpayers subjected to the PPT and GAAR provisions might have to go through GAAR twice —first under the treaty and then under the domestic law. “It