FIIs to have time to set right investment arrangements: FinMin
New Delhi: The finance ministry on Thursday said it will give FIIs time to convert their 'impermissible arrangements' into 'permissible' ones to escape the provisions of the proposed anti-avoidance rules or GAAR.
Finance Secretary R S Gujral told reporters that the proposed General Anti-Avoidance Rule (GAAR) provisions would be not have retrospective effect and would come into force from April 1, 2012.
"FIIs had raised concerns that if currently they are impermissible and become permissible in three months, even then GAAR will be applicable? We want to clarify that we will take care. If you are genuinely operating then you will not be harassed," Gujral said.
Referring to the concerns of the foreign institutional investors (FIIs) on whether government would apply GAAR in respect of income generated in the past, he said, "we have told them very categorically that Bill says that GAAR will be applicable on income from April 1, 2012. We are not talking about income of previous years."
He said that only those arrangements of FIIs which are entered into with the intention of tax avoidance, also called "impermissible arrangement", would invoke GAAR.
"If you are saying you are operating from country A or B then you must have your establishment there, you must actually operate from there. We would say, start trading from India.
But if you don't want to trade from India, then at least trade from country where you are contending that you have an establishment," Gujral added.
Concerned over the impact of general anti tax-avoidance rules, FIIs have held three rounds of discussion with the finance ministry's committee on GAAR and had suggested changes in certain wordings which they fell are vague and could be interpreted in different ways.
"We have asked them to be in touch with our GAAR committee. Whatever those small concerns are there we will address," Gujral added.
He said that Standing Committee too has said that the onus of proving tax avoidance intent should be entirely on the Revenue Department.