GAAR rollback not because of any fear: Pranab

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SME Times News Bureau | 09 May, 2012
The decision to defer the implementation of the General Anti-Avoidance Rules (GAAR) is not because of any fear or apprehensions, Finance Minister Pranab Mukherjee said Tuesday as the Lok Sabha passed the Finance Bill for 2012-13.

"GAAR I have agreed to defer but not because of fear or apprehension. I am not afraid of any consequences," Mukherjee said while replying to the debate on the bill.

Mukherjee Monday announced the deferment of implementing the GAAR by a year. He also introduced changes in the proposed legislation, which is aimed at preventing tax evasion.

The Left parties opposed the deferment, saying the government had taken the decision under pressure from the US and the markets. The left parties had moved a motion seeking implementation of GAAR from the current financial year.

But the motion was defeated by 342 to 22 as the main opposition BJP backed the government on this issue.

The CPI-M said Tuesday said that the decision to defer the implementation of the General Anti-Avoidance Rules (GAAR) by one year "is a meek surrender to finance capital ... and the US".

"The US Treasury Secretary had personally lobbied with the Indian finance minister to revoke the GAAR, during the latter's recent US visit in April 2012," it said.

GAAR was meant to strengthen India's tax laws to prevent foreign investors from avoiding paying taxes on capital gains in India, using the Double Taxation Avoidance Agreements (DTAAs) with tax havens like Mauritius, the CPI-M said.

"It is noteworthy that over 40 percent of FDI inflows into India are routed through Mauritius, in order to facilitate crores of rupees of tax savings by foreign companies at the cost of the Indian exchequer.

"GAAR have been implemented in countries across the world to crack down on such tax avoidance, including in developing countries like South Africa and China in recent times.

"Dilution of the GAAR in India would lead to the loss of thousands of crores of tax revenues for the government," a CPI-M statement said.

It said other "retrograde announcements" by Mukherjee included the cut in capital gains tax on private equity, cut in withholding tax on foreign borrowings and withdrawal of tax on property transactions.

"These are all meant to favour big financiers and real estate players.

"The government's excuses on lack of resources to fund subsidies and social welfare scheme ring hollow in the face of such tax largesse for the big businesses."