The General Anti Avoidance Rule will be effective from the 1st of April ,2017. It seeks to prevent companies from routing transactions through other countries to avoid taxes. <br/><br/>Finance Ministry said the proposal to apply GAAR will be vetted first by the Principal Commissioner of Income Tax, Commissioner of Income Tax and at the second stage by an Approving Panel headed by a judge of High Court. <br/><br/>The Ministry also clarified that adoption of anti-abuse rules in tax treaties may not be sufficient to address all tax avoidance strategies and the same are required to be tackled through domestic anti-avoidance rules.<br/><br/>Allaying investors' apprehensions, the government said adequate procedural safeguards are in place to ensure that the General Anti Avoidance Rule or GAAR is invoked in a uniform, fair and rational manner. <br/><br/>The Finance Ministry also clarified that GAAR will not apply if the jurisdiction of Foreign Portfolio Investor is finalized on the basis of non-tax commercial considerations and purpose is not to obtain tax benefit. <br/>Besides, GAAR will not interplay with the right of the taxpayer to select or choose method of implementing a transaction. India will be the 17th nation in the world to have laws that aim to close tax loopholes. <br/><br/>GAAR is in force in nations like Australia,Singapore, China and the UK.<br/>With Anand Kumar, Shiela, AIR News, Delhi.

The General Anti Avoidance Rule, GAAR, will be effective from the 1st of April this year. It seeks to prevent companies from routing transactions through other countries to avoid taxes. <br/><br/>Finance Ministry has said that the proposal to apply GAAR will be vetted first by the Principal Commissioner of Income Tax, Commissioner of Income Tax and at the second stage by an Approving Panel headed by a judge of High Court. It has assured the stakeholders that adequate procedural safeguards are in place to ensure that GAAR is invoked in a uniform, fair and rational manner. <br/><br/>The Ministry also clarified that GAAR will not apply if the jurisdiction of Foreign Portfolio Investor (FPI) is finalized based on non-tax commercial considerations and the main purpose of the arrangement is not to obtain tax benefit. Besdies, GAAR will not interplay with the right of the taxpayer to select or choose method of implementing a transaction. <br/><br/>It said, government is committed to providing certainty and clarity in tax rules.