Delay GAAR by 3 years, retain Mauritius benefits, recommends Shome panel

NEW DELHI: In what could be a huge relief to both corporates and financial markets, the Review Committee on General Anti Avoidance Rules (GAAR) headed by Parthasarathi Shome has recommended a delay in implementation by three years. Sources in the government told ET Now that the panel wants GAAR to kick in from 2015-16.

Another major recommendation of the panel is with respect to continuation of Mauritius benefits. The original draft of GAAR denied corporates the tax benefits, but the Shome panel is believed to have suggested that the benefits still be given. The third recommendation which may geatly dilute the original GAAR is that all pre-GAAR investments will not come under the ambit of the rule.

The recommendations if implemented will provide corporates time to prepare for the introduction of GAAR. The markets are likely to view this developmet as another positive signal from the Finance Ministry. The Finance Minister P Chidambaram had recently promised corporates and investors a tax friendly administration.

The committee had been set up by the government to examine all issues related to the controversial GAAR. Introduction of GAAR, proposed in the 2012-13 Budget to check tax evasion, had triggered strong opposition by foreign investors following which its implementation was postponed till April next year.

The Finance Ministry came out with draft guidelines on GAAR in June and had invited stakeholders comments. Later the Prime Minister set up an expert committee under Shome, a taxation expert, to hold fresh consultations on the controversial tax issue.

The consultation process was "very intensive" and the panel had already met some policy makers and interacted with several international and domestic tax-advisory firms, and a few concerned industrialists, Shome had said earlier last month.

"After the draft of the recommendations is submitted, we will start the consultation process... I hope that by September 30 I will submit the official report," Shome had said.

(With inputs from Agencies)