Taxation
Government postpones GAAR implementation by two years to 2016

The decision to postpone the implementation follows recommendations of the Shome Committee set up to look into investor concerns

 

New Delhi: Giving a big relief to overseas investors, the Indian government has postponed implementation of controversial General Anti Avoidance Rules (GAAR) provisions by two years to 1 April 2016, reports PTI.

 

“Having considered all the circumstances and relevant factors, the government has ...decided that provisions of Chapter 10A of the Income Tax Act (dealing with GAAR) will come into force from 1 April 2016 as against 1 April 2014,” Finance Minister P Chidambaram said on Monday.

 

The GAAR provisions, introduced by the then finance minister Pranab Mukherjee in the Budget 2012-13, were aimed at checking tax avoidance by overseas investors. The proposal, however, generated controversy, with investors expressing apprehensions that it would result in unnecessary harassment by tax authorities.

 

The decision to postpone the implementation, Chidambaram said, follows the recommendations of the Shome Committee which was set up by prime minister Manmohan Singh in July last year to look into investor concerns.

 

The government, Chidambaram further said, has accepted major recommendations of the panel with some modifications.

 

"The modifications that we have done are fair, non-discriminatory, just and strike a balance between interest of revenue and interest of investors. So, all apprehensions should now be set addressed," he said.

 

The GAAR provisions, the Minister also clarified, would override the double taxation avoidance agreement (DTAA) benefits if the arrangements were intended solely to evade taxes.

 

No investor, Chidambaram said, "should now have any apprehension about his investments in India. Only those arrangements, which have been made for the purpose of tax avoidance, will be brought under GAAR, he added.

 

He also clarified that investments made by non-resident Indians (NRIs) will not be covered by the provisions of GAAR.

 

About the applicability of the GAAR provisions, he said FII investments seeking benefits under Sec 90 and Sec 90 (A) of the I-T Act (dealing with DTAA) would be covered.

 

The Minister said only those arrangements which are aimed at only obtaining tax benefit would be considered as 'impermissible arrangement' and would attract GAAR.

 

As per the original GAAR provisions under Chapter 10 (A) of Finance Bill, 2012, the anti-tax avoidance provisions could be invoked "if one of the purposes" was to obtain tax benefit.

 

The Minister clarified that there would be a threshold limit of Rs3 crore of tax benefit for invocation of GAAR, as suggested by the Shome panel.

 

Moreover, Chidambaram said, that investments made before 30 August 2010, would not attract the provisions of GAAR.

 

On whether tax officials can look into cases between 30 August 2010, and the date for implementation of GAAR, he said: "They can go back is technically correct. But in order to go, you have to comply with a number of provisions in the I-T Act. If the assessment is completed, you can reopen the assessment only after very strict circumstances."

 

"This decisions (of GAAR rules modifications) have by and large addressed the concerns that were expressed by investors ... Most of the apprehensions I think have been removed now," Chidambaram said.

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Retail inflation rises to 10.56% in December

The vegetables basket in December recorded the highest inflation of 25.71% among all the constituents that make the CPI

 

New Delhi: Rising for the third consecutive month, retail inflation breached the double-digit mark at 10.56% in December, driven by higher prices of vegetables, edible oil, pulses and cereal, reports PTI.

 

The retail inflation was 9.90% in November and 9.75% in October.

 

The vegetables basket in December recorded the highest inflation of 25.71% among all the constituents that make the Consumer Price Index (CPI), according to data released today.

 

Vegetables were followed by the oil and fats segment at 16.73%. Sugar turned more expensive by 13.55%. Pulses and cereals became dearer by 13.46% and 13.70% on an annual basis. Meat, fish and egg rose become 11.64% more expensive.

 

Clothing and footwear witnessed 10.74% increase in prices.

 New Delhi: Rising for the third consecutive month, retail inflation breached the double-digit mark at 10.56% in December, driven by higher prices of vegetables, edible oil, pulses and cereal, reports PTI.

 

The retail inflation was 9.90% in November and 9.75% in October.

 

The vegetables basket in December recorded the highest inflation of 25.71% among all the constituents that make the Consumer Price Index (CPI), according to data released today.

 

Vegetables were followed by the oil and fats segment at 16.73%. Sugar turned more expensive by 13.55%. Pulses and cereals became dearer by 13.46% and 13.70% on an annual basis. Meat, fish and egg rose become 11.64% more expensive.

 

Clothing and footwear witnessed 10.74% increase in prices.

 

In urban areas, retail inflation rose to 10.42% in December from 9.69% in the previous month. The CPI for rural population increased to 10.74% during the month from 9.97% in November.

 

All India provisional General (all groups) CPI numbers of December 2012, for rural, urban and combined are 126.8, 124 and 125.6, respectively.

 

The Reserve Bank of India (RBI) is expected to take into account the double-digit retail inflation when it comes out with its third-quarter policy review later this month.

 

Wholesale price based inflation for November was at 7.24%, much higher than the RBI comfort level of 5%-6%.

 

Concerned over the persistent inflation, the RBI has kept key interest rates unchanged since April 2012.

 

Industrial output growth rate had contracted by 0.1% in November, from a robust 8.3% in October.

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