Tax Avoidance is an area of concern across the world. The rules are framed in different countries to minimize such avoidance of tax. Such rules in simple terms are known as ‘General Anti Avoidance Rules’ or GAAR. Thus, GAAR is a set of general rules enacted so as to check the tax avoidance. It empowers the Revenue Authorities in a country to deny the tax benefits of transactions or arrangements which do not have any commercial substance or consideration other than achieving the tax benefit. GAAR is likely to put a curb on use of Tax Havens and Round Tripping. These rules are likely to come into force in India in 2016.
However, it is considered to be too sweeping in nature and there was a fear (considering poor record of tax authorities in India) that Assessing Officers will apply these provisions in a routine manner (or read misuse) and harass the general honest tax payer too. So, it was felt that there is a need for further legislative and administrative safeguards and at least a minimum threshold limit for invoking GAAR should be introduced so that small time tax payers are not harassed.
As a result, an Expert Committee headed by Dr Parthasarathi Shome (to give recommendations on the reforms in tax administration) was set up to suggest recommendations. Most of these recommendations have been accepted – except the one regarding retrospective transaction – by the government, albeit some with modifications. Committee has also asked for merging CBDT and
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