FDI logjam in Parliament may delay GAAR amendment
Nov 26 2012 , New Delhi
These fears have risen as the opposition parties are stalling the winter session of Parliament over FDI in multi-brand retail issue, and so far there is no certainty when normality would be restored to take up legislative business.
Already, 25 bills have been listed for consideration and passage in this session, and they included pension and insurance reforms and amendments to banking laws. “The amendments are ready and guidelines have been prepared, but Parliament should run to get the amendments passed,” finance minister P Chidambaram told Financial Chronicle.
Chapter 10 A of Income Tax Act that gives unbridled powers to assessing officer to investigate into tax avoidance cases is proposed to be amended to water it down to ensure foreign investors are not weary of investments fearing harassment by taxmen.
GAAR proposed in 2012-13 budget based on the experiences of some of the countries ran into rough weather following stiff resistance from foreign and domestic investors fearing harassment from taxmen. Sensing the adverse reactions to GAAR, the then finance minister Pranab Mukherjee decided deferred implementation of GAAR by one year till April 1, 2013 during the passage of finance bill in Parliament.
The government later appointed a committee headed by tax expert and former advisor to finance minister, Parthasarathi Shome, to look into their concerns and the committee recommended deferring implementation of this advance instrument of tax administration by three years on administrative grounds.
Finance ministry is believed to be of the view that it need not be postponed by three year, but instead by one more year till April 1, 2014. However there is no finality of this as yet.
Chidambaram was non-committal if GAAR amendments could be carried out along with the budget as government has time till April 1, 2013, as its implementation has been deferred till then. “Let us see,” Chidambaram to a question in this regard.
Shome committee has submitted two reports: one on GAAR and the other on retrospective amendments relating to indirect transfers.
In its report on GAAR, the panel has also suggested abolition of tax on gains arising from transfer of securities, which is subject to securities transaction tax (STT).
It had recommended that GAAR should not be invoked in intra-group transactions there should be a monetary threshold of Rs 3 crore of tax benefit should be fixed while applying the provision.
Regarding foreign institutional investors (FIIs), the report suggested that if they choose not to take any benefit under India’s double tax avoidance agreements, then the provisions should not be applied.