GAAR likely to be put off for two years to improve India’s business environment

The implementation of general anti-avoidance rules (GAAR) is likely to be put off by about two years in order to allow the business environment in India to improve. But it will have to be implemented at least partially by 2017 to ensure compliance with G20’s international framework on preventing treaty abuse, The Economic Times (ET) reported.

India has shown keen interest in the Organisation for Economic Co-operation and Development’s (OECD) plan on Base Erosion on Profit Shifting (BEPS). "A holistic view will be taken on GAAR... There is a demand but a balance needs to be struck," ET quoted a government official as saying.

According to the newspaper, industry would like GAAR to be done away with completely, but India will have to take action in this regard due to international commitments. In the run-up to the Budget, discussions were held on removing hurdles to investment. The issue of postponing GAAR had also come up in these talks.

GAAR was earlier scheduled to be implemented from April 1, but the Narendra Modi-led government does not want to mar the investment sentiment in the early stage of implementation of its economic agenda.

"Deferment of GAAR would avoid any uncertainty that could creep into tax outcome due to subjectivity involved in GAAR. Our tax system should first be able to contain disputes on tax matters in the current regime before we think of GAAR," Rahul Garg, leader, direct tax, PwC India, told ET.
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