Page 7 - Digi Notes - GA- 27-03-2016
P. 7
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(General Awareness) GAAR - General Anti-Avoidance Rule – I
Avoiding Tax has been a general concern of the Tax authorities.
Many countries have presented different rules for regulating these tax avoidance.
For such measures countries have presented GAAR.
GAAR shall be a general set of rules focused on regulating tax-avoidance methods across
the world.
Indian Government has taken initiative to introduce GAAR or General Anti Avoidance
Rules with a view to increase tax collections.
The liability of taxes has different definitions it can be divided into -
Evasion of taxes - Means illegal arrangements where liability to tax is hidden or ignored
Avoidance of taxes - An arrangement of a tax payer’s affairs that is intended to reduce
his liability and that although the arrangement could be strictly legal.
Mitigation of taxes - And arrangement
Planning of taxes - Arrangement of a person’s business and /or private affairs in order
to minimize tax liability.
GAAR is basically concerned with Avoidance of taxes.
Official GAAR definition:
GAAR is a concept which generally empowers the Revenue Authorities in a country
to deny the tax benefits of transactions or arrangements which do not have any
"commercial substance" or consideration other than achieving the tax benefit.
India's take on GAAR and Controversy -
On 12th August, 2009 the Direct Taxes Code Bill was presented which contained
provisions for GAAR.
The Direct Taxes Code 2010 was passed with effect from April, 2012, But due to its
negative publicity it was postponed and since has been postponed periodically.
On 28th June, 2012 - Finance ministry released first draft guidelines for GAAR.
Prime Minister Manmohan Singh appointed Mr. Parthsarthi shome as the Head of the
committee to review GAAR norms.
Shome committee proposed to defer GAAR by 3 years.
On 27th September, 2013 - GAAR would be applicable to only to foreign institutional
investors that have not taken the benefit of an agreement under Section 90 or Section
90A of the I-T Act or Double Taxation Avoidance Agreement (DTAA).
It has three important guidelines -
Investments made by foreign investors prior to August 2010 will not attract
GAAR;
GAAR provisions that will come into effect from April 2016 and
Apply only to business arrangements with a tax benefit exceeding Rs3 crores.
It has been widely criticised and as per the Union budget 2015-16 it shall be
implemented on or after April 1, 2017.
We shall discuss SAAR, DTAA, Advantages/Disadvantages and Vodafone issue in the next
couple of pages.
Date of Release -19-FEB-16 SUBJECT: GA www.bankersguru.org
(General Awareness) GAAR - General Anti-Avoidance Rule – I
Avoiding Tax has been a general concern of the Tax authorities.
Many countries have presented different rules for regulating these tax avoidance.
For such measures countries have presented GAAR.
GAAR shall be a general set of rules focused on regulating tax-avoidance methods across
the world.
Indian Government has taken initiative to introduce GAAR or General Anti Avoidance
Rules with a view to increase tax collections.
The liability of taxes has different definitions it can be divided into -
Evasion of taxes - Means illegal arrangements where liability to tax is hidden or ignored
Avoidance of taxes - An arrangement of a tax payer’s affairs that is intended to reduce
his liability and that although the arrangement could be strictly legal.
Mitigation of taxes - And arrangement
Planning of taxes - Arrangement of a person’s business and /or private affairs in order
to minimize tax liability.
GAAR is basically concerned with Avoidance of taxes.
Official GAAR definition:
GAAR is a concept which generally empowers the Revenue Authorities in a country
to deny the tax benefits of transactions or arrangements which do not have any
"commercial substance" or consideration other than achieving the tax benefit.
India's take on GAAR and Controversy -
On 12th August, 2009 the Direct Taxes Code Bill was presented which contained
provisions for GAAR.
The Direct Taxes Code 2010 was passed with effect from April, 2012, But due to its
negative publicity it was postponed and since has been postponed periodically.
On 28th June, 2012 - Finance ministry released first draft guidelines for GAAR.
Prime Minister Manmohan Singh appointed Mr. Parthsarthi shome as the Head of the
committee to review GAAR norms.
Shome committee proposed to defer GAAR by 3 years.
On 27th September, 2013 - GAAR would be applicable to only to foreign institutional
investors that have not taken the benefit of an agreement under Section 90 or Section
90A of the I-T Act or Double Taxation Avoidance Agreement (DTAA).
It has three important guidelines -
Investments made by foreign investors prior to August 2010 will not attract
GAAR;
GAAR provisions that will come into effect from April 2016 and
Apply only to business arrangements with a tax benefit exceeding Rs3 crores.
It has been widely criticised and as per the Union budget 2015-16 it shall be
implemented on or after April 1, 2017.
We shall discuss SAAR, DTAA, Advantages/Disadvantages and Vodafone issue in the next
couple of pages.
Date of Release -19-FEB-16 SUBJECT: GA www.bankersguru.org
