Comments invited on new tax rules, PM to take final call

New Delhi - The government Friday issued draft guidelines on the General Anti Avoidance Rules (GAAR), inviting comments from different stakeholders and clarified that Prime Minister Manmohan Singh will take final call on the issue after receiving feedback.

The Central Board of Direct Taxes (CBDT) issued the draft guidelines inviting comments and suggestions from different stakeholders.

A clarificatory note released by the Prime Minister's Office said that Manmohan Singh has not seen the draft guidelines and would take a final call on the issue after receiving feedback from the stakeholders.

Distancing itself from the guidelines, the PMO said it was issued from the "official level of the finance ministry" and it has no approval from the prime minister, who now holds finance portfolio following Pranab Mukherjee's quitting to contest the July 19 presidential election.

"The GAAR guidelines that have been put up on the government website from the official level of the finance ministry and shared with some stakeholders are only draft guidelines and have been put out for receiving wide-ranging feedback and for discussion purposes only," the Prime Minister's Office said.

“These have not been seen by the prime minister and will be finalised with the approval of the prime minister, who holds the finance portfolio, only after considering the feedback received," it added.

The draft guidelines are put on the finance ministry and income tax department websites. Comments and suggestions on the issue have been invited till July 20, 2012.

The CBDT clarified that the proposed rules, which aims at checking loopholes in the taxation system and trace tax evaders, will be implemented from April 1, 2013.

Pranab Mukherjee had proposed the new rules in the union budget for 2012-13 presented in March.

However, implementation of the rules was deferred by a year following widespread protests from business community, especially overseas investors.

According to the guidelines, the foreign institutional investors (FIIs) would be exempt from the new rules. The controversial tax avoidance rules will not cover participatory notes, through which many foreign investors invest in India.

The guidelines also calls for a monetary threshold for implementation of GAAR.

“The committee feels that in order to avoid the indiscriminate application of the GAAR provisions and to provide relief to small taxpayers, there should be monetary threshold for invoking the GAAR provisions,” it said.

The draft guidelines have been prepared by a committee chaired by Director General of Income Tax (International Taxation).