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Days of tax avoidance over: General Anti-Avoidance Rule to be effective from April

The Finance Ministry, on Friday, announced that the General Anti-Avoidance Rule (GAAR) will be effective from April 1, 2017. GAAR targets any transaction or business arrangement that is entered into with the intention to avoid tax. Hence, the objective of these rules would be to check aggressive tax planning.

The Ministry announced that GAAR will not to apply to foreign portfolio investors if the main purpose of jurisdiction finalised is not to obtain tax benefits. It further announced that it will not interplay with the right of the taxpayer to select or choose method of implementing a transaction.

The proposal to invoke GAAR will involve a two-stage process. It will be vetted first by the Principal Commissioner of Income Tax and by an approving panel headed by a High Court judge at the second stage. The Ministry stated that if a case of avoidance is sufficiently addressed by Limitation of Benefits (LoB) provisions in tax treaty, there shall not be an occasion to invoke GAAR.

GAAR was first introduced by the then Finance Minister, Pranab Mukherjee, during the Budget session in 2012. During the 2015 Budget session, Finance Minister Arun Jaitley announced that its implementation would be delayed by two years.

Source: dnaindia.com