Arun Jaitley puts GAAR in cold storage

In continuation with its pro-investors stance, government may defer implementation of General Anti Avoidance Rules (GAAR) in the forthcoming Union budget.

There has been an intense lobbying from the industry that the controversial GAAR implementation should be deferred. According to existing rules, GAAR will come into effect from April 1, 2015. Retrospective amendment to the income tax act 1961 and Gaar proposed by the UPA government were perceived as the steps which hit investors sentiment towards India.

“An announcement on GAAR are expected in the budget,” said government sources.

Last week during the pre-budget consultation with the finance minister Arun Jaitley, industry has pitched for postponement of Gaar. CII president Ajay S. Shriram had advocated that GAAR should be deferred for another two years as there is need for further measures to create a transparent, predictable and non- adversarial tax system which would rekindle investment sentiment.

Earlier Assocham had urged the Centre to amend the Indian income-tax law so as not to introduce the general anti avoidance rules (GAAR) from assessment year 2016-17 as India’s economy is neither mature enough to stand up to its exacting standards nor is the tax administration ready to handle such a highly sophisticated instrument. It had warned that if GAAR was introduced at this stage, it will only act as a handle for more harassment of taxpayers. Earlier in a report Parthasarathi Shome committee had recommended that Gaar should be deferred by three years to April 2017.