Skip to main content

Why should foreign portfolio investors feel the tremors of General Anti-Avoidance Rules, GAAR?


Earlier in the middle of 2013, the then UPA-2 succumbed to the dissensions amongst the investors to defer General Anti-Avoidance Rules or GAAR by two years. What had been codified in 2012 to become effective in 2013 was suddenly clothed in Government’s ‘realization’ of administrative preparedness to cope with. Smelt Fishy!!! Interestingly, GAAR was meant to empower the Government to declare any arrangement as an Impermissible Avoidance Arrangement (IAA), which was set up with discerning where the main motive was obtaining a tax benefit. What transpired in the budget 2013 was government’s exercise to narrow down the scope of IAA to accommodate GAAR, and thus losing any steam of stringency, which investors were crying out loud that GAAR came along with. Moreover, if there is a commercial substance (“Intentionality”, “Significant on Business Risks, and/or Net Cash Flows”), then provisions of GAAR could be non-interfering, thus making the entire arrangement conducive for investments. If the Finance Act 2013 added language in relation to availing treaty benefits, it remains to be seen if this language will be utilized in denying treaty benefits to bona fide users, which in fact is a classic language in avoiding the invocation of this denial. I say this, since the Committee invested with the responsibility to scrutinize GAAR cases would no doubt have their opinions curtailed and cut under the double blades of investor friendliness and malleable abuse of Direct Taxes Code.


Fast forward to the current times, and this is what is transpiring: In other words, ambiguities in it could very well decide the future of investments in India, and the ambiguities lie with defining the “proper” “commercial substance” usage.

Comments

Popular posts from this blog

GST – Impact on Small Industry and the Informal Sector

The Goods and Services Tax (GST), that came into effect on 1st July, 2017, has been lauded as the most comprehensive contemporary reform of Indian indirect taxation. Aimed at creating a common, unified and integrated domestic market, allowing the free flow of goods and services across state lines, GST is supposed to deliver Indian industry and thereby the economy the competitive edge apparently lacking till now.
Reality is however a far cry from the picture painted by government. GST by creating platform a conducive to economies of scale and nullifying regional tariffs, is both conceptually and practically advantageous to big business and detrimental to the informal sector and small businesses.
These groupings, informal and small, though quite different have some degree of overlap. Informal business is overwhelmingly small but not all small businesses are informal. GST’s impact on these groups is quite different both with regard to extent of impact or in terms of results sought.
Small Bu…

Data Governance, FinTech, #Blockchain and Audits

Data Governance and Audit Trail Data Governance specifies the framework for decision rights and accountabilities encouraging desirable behavior in data usage Main aim of Data Governance is to ensure that data asset are overseen in a cohesive and consistent enterprise-wide manner Why is there a need for Data governance?  Evolving regulatory mechanisms and requirements Could integrity of data be trusted? Centralized versus decentralized documentation as regards use, hermeneutics and meaning of data Multiplicity of data silos with exponentially rising data Architecture Information Owner: approving power towards internal + external data transfers + business plans prioritizing data integrity and data governance Data steward: create/maintain/define data access, data mapping and data aggregation rules Application steward: maintain application inventory, validating testing of outbound data and assist master data management Analytics steward: maintain a solutions inventory, reduce redundant solu…

Report release and Panel discussion. “Unfolding Crisis – The Case of Rising NPAs and Sinking Public Accountability” at Constitution Club of India in New Delhi at 3:00 p.m. on 14th September, 2016

Public Finance Public Accountability Collective (PFPAC)
cordially invites you to attend the formal release of its first publication 
Unfolding Crisis – The Case of Rising NPAs and Sinking Public Accountability” 
at
Constitution Club of India in New Delhi at 3:00 p.m. on 14th September, 2016

Additionally, PFPAC will be organising a panel discussion to analyse the intricacies of Non-Performing Assets (NPAs) with a panel consisting of notable people from across the social, political, economic and financial spectrum:
•Mr. C.H. Venkatachalam – General Secretary of the All India Bank Employees Association (AIBEA)
•Dr. C.P. Chandrasekhar – Professor at the Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University
•Dr. Indira Rajaraman – Former Member of the 13th Finance Commission; Former Professor at Indian Institute of Management (Bangalore); and Former Member of Central Board of Directors, Reserve Bank of India
•Dr. Mohan Guruswamy –Chairman, Centre for Pol…