New Delhi, Oct 1 (IANS): India will frame rules on tax evasion in the next 20 days after examining recommendations of the expert panel which submitted its final report on the controversial General Anti-Avoidance Rules (GAAR) Monday.
Finance Minister P. Chidambaram said the government would consider the committee's suggestions, made after perusing all stakeholders' feedback, over the next 10 days and decide on them in 20 days.
After the rules were finalised, the Income-Tax Act would be amended if necessary, Chidambaram said.
Prime Minister Manmohan Singh had appointed the committee, headed by Parthasarthi Shome, in July when he was holding the finance portfolio to recommend measures that would allay investor concerns.
The government had earlier deferred implementation of GAAR, introduced by the then finance minister Pranab Mukherjee in his 2012-13 budget to check tax evasion.
In its draft report Sep 1, the panel has suggested that the General Anti-Avoidance Rules (GAAR) be postponed by three years and the capital gains tax on transfer of securities be abolished to ensure investment and capital flows.
The committee also Monday submitted a draft report on retrospective amendments to the finance minister.
Shome told reporters that enough time will be given for an informed debate on the panel's suggestions on retrospective amendments.
The committee had called GAAR "an extremely advanced instrument of tax administration - one of deterrence, rather than for revenue generation" for which, it said, intensive training of tax officers who would specialise in the finer aspects of international taxation is needed.
It recommended a grandfathering clause to protect existing investments and providing protection for transactions routed through Mauritius with which India has a double taxation avoidance treaty and is considered a tax haven.
To protect existing investments, it said: "All investments (though not arrangements) made by a resident or non-resident and existing as on the date of commencement of the GAAR provisions should not be taxed as per GAAR provisions."
The panel made a case for abolition of capital gain tax to attract investment.
"Internationally, many countries have stopped taxing capital gains because you want investment, and investment and capital flows are very fungible. If you are looking for investment like in our case, it is very important to do that," Shome had then said.
"So, I have suggested in the committee and everyone has agreed is that we need to look for what is going to rejuvenate our investment. From that investment there will be growth, employment and other things, which we have lost in the past two years or so."
The committee had also recommended that GAAR be applicable only if the monetary threshold of tax benefit is Rs.3 crore and more.
The finance ministry had last month expanded the scope of the terms of reference of the committee to include all non-resident tax payers instead of only FIIs."
"The draft report has recommended certain amendments in the Income-tax Act, 1961; guidelines to be prescribed under the Income-tax Rules, 1962; circular to clarify GAAR provisions along with illustrations; and other measures to improve tax administration specifically oriented towards GAAR matters," a finance ministry release had said then.