Update on India General Anti Avoidance Rules (GAAR)

Tax Controversy & Dispute Resolution ()

In a statement issued, the Finance Minister (FM) has, on behalf of the government, accepted most of the recommendations of the Expert Committee set up to look into the grievances on the General Anti-Avoidance Rules (GAAR) provisions. The final report of the Expert Committee was made available as well.

The key takeaways from the FM's Statement are:

  • Introduction of GAAR will be deferred by two years to income arising from 1 April, 2015 (Indian Financial Year 2015-16).
  • Investment made before 30 August, 2010 will be grand-fathered.
  • Exclusion to investors in an foreign institutional investor (FII) structure, in respect of investments in Indian listed securities.
  • Either GAAR or Specified Anti-Avoidance Rules (SAAR) will apply (this will be covered in GAAR guidelines to be issued).
  • GAAR will not apply if the tax benefit arising from the transaction is below INR 30 million (approx USD 0.55 million).
  • GAAR will be attracted if the main purpose (and not one of the purposes) of a transaction or a part of the transaction is to obtain a tax benefit.