The Amazing Clarity on Shome Panel’s GAAR Employment Caveats

The expert himself was on tax speak on ETNOW delineating the difference between SAAR and GAAR and how India is not ready for GAAR principles as evidenced from the bout of foggy complaints of abusive treatment from the government after President Pranab’s retiring salvo was discovered by the markets six months ago.

However Mr Parthasarthi Shome was exceptionally diligent in listing all the applicable exceptions to GAAR apart from recommending a deferment of implementation till FY 2017-18 made necessary by the immediate flight of Capital after the provisions were announced. 

1. Changes to the Mauritius treaty will be made separately and such compliance issues will not be confused in a GAAR notice which will apply to artificial and abusive arrangements

2. Dividends and Buyback arrangements as also any other intragroup arrangements including setting up of branch/subsidiary or transfer pricing issues will not be subject to GAAR when applicable ( Advanced pricing has been concurrently introduced by the CIT/DIT alloing companies to use pore approved rates of transfer pricing)

3. Tax mitigation is separate from tax avoidance 

4. GAAR ill not apply for investments through Debt/Equity

5. A minimum requirement of commercial substance and minimum transaction of more than INR 30 million in tax benefits

The widespread lauding of Mr. Shome consequently is all over the fourth estate and the excitement is palpable. However none of these enablers count for immediate positive dollars which will likely come in CY 2013 now when policy is indeed changed. It can be argued by the polity and thebureaucracy and indeed it  such that these clarifications cwere never intende3d to be crossed by the DIT in its bid to increase revenue or prove such points to transnational corporations, but the clarity is late in coming and should have been provided when each such doubt was raised which Mr Shome has shown can be done with clarity conciseness and effect. 


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