The controversial guidelines on the tax General Anti-Avoidance Rules are likely be amended in 20 days, after considering Monday's final recommendations by the Parthasarthi Shome panel on the subject.
Another report by the panel, on indirect transfer of Indian assets by non-residents, also given on Monday, would be released for public comments shortly. In its recommendations last month, the Shome panel had proposed deferring GAAR for three years, to April 2016.
Through this year's Finance Act, the government had proposed to introduce the anti-avoidance rules from April 2013. A deferment would need amendment to the Income Tax Act.
"Stage-1, finalisation of our views on the report, will be completed in the next 10 days. Stage-2, the final GAAR rules, would take another 10 days because that would require vetting by the ministry of law. In stage-3, it will go to the cabinet if the Act has to be amended," said Finance Minister P Chidambaram [ Images ].
The rules were announced by the government to check tax avoidance by companies routing their investments into India [ Images ] through tax havens.
Faced with widespread criticism, the government formed the Shome panel to address the concerns of investors. The panel, deviating majorly from draft guidelines issued by a finance ministry committee in June, had recommended abolition of capital gains tax on transfer of securities.
While the Central Board of Direct Taxes had said GAAR would be invoked if "one of the main purposes" was to obtain tax benefit, the Shome panel said only arrangements with the main purpose of obtaining tax benefit should be covered under GAAR.
And, that GAAR provisions not be invoked to examine the genuineness of residency of entities in nations with whom we've signed a tax avoidance treaty, such as Mauritius or Singapore.
Asked about the panel's report on retrospective taxation, Chidambaram said it would be put up on the ministry's website for comments once they'd gone through it.
The panel is likely to have proposed softening the blow of retrospective amendments on investors. The report might decide the fate of Vodafone's Rs 12,000-crore (Rs 120 billion) tax case with the Indian government. The minister had earlier said a decision on sending a tax notice to the company would be taken after getting the Shome panel's report on retrospective amendments and the department wouldn't act rashly.
Vodafone India's non-executive chairman, Analjit Singh, after meeting finance ministry officials recently, had said the company was willing to discuss the matter with the government.