GAAR to take effect from 2017-18: Government

The government on Friday said the General Anti-Avoidance Rules (GAAR) would take effect from FY18, dashing hopes of further deferment of the dreaded norms.

“Provisions of the General Anti Avoidance Rule (GAAR) contained in I-T Act shall be effective from FY18 onwards… General public and stakeholders are requested to provide their inputs with respect to those provisions of GAAR which require further clarity,” the income tax department said in a series of tweets.

Acceding to the demand from foreign investors, finance minister Arun Jaitley had, in the last Budget, deferred the implementation of GAAR by two years to financial year 2017-18 (assessment year 2018-19) and subsequent years. GAAR is meant to reduce tax avoidance for investments made by entities based in tax havens.

The finance ministry has now said if the input from stakeholders relate to interpretation of a specific real world structure or arrangement, the structure should be one that commonly occurs in the sector and involves clarification of general principles of application.

“Further, in relation to such structure, the particular provision and apprehensions or doubts along with basis thereof may also be provided with all the relevant facts.”

“It is expected that more clarity will be available once the guidelines are framed setting out what types of arrangements would be impacted by the GAAR provisions. This will enable businesses to better plan their transactions,” said Sunil D Shah, partner,

Deloitte Haskins & Sells LLP.

The comments are invited till June 30. The provisions of GAAR are contained in Chapter X-A of the income tax Act, 1961.

The necessary procedures for application of GAAR and conditions under which it shall not apply, have been enumerated in Rules 10U to 10UC of the Income-tax Rules, 1962, the government said.

“Following a consultative approach, CBDT has rightly asked the stakeholders for inputs in order to ensure that the guidance notes provide the clarity needed by the public and GAAR is implemented smoothly. At the same time, the public has been requested to abstain from referring to hypothetical structures and provide meaningful inputs in relation to realistic and common structures to ensure that the exercise is fruitful,” said Rakesh Nangia, managing partner at Nangia & Co.

The GAAR provisions had been originally proposed in the Direct Taxes Code. They were deferred from time to time to enable thorough understanding of the impact of the provisions.