New Delhi: Modified version of controversial General Anti Avoidance Rules (GAAR) provisions will come into effect from April 2016, Finance Minister P Chidambaram said on Thursday.
A number of representations were received against GAAR provisions introduced in the last Budget. Following which the government had set up an expert committee under Parathasarthi Shome to give recommendations on the anti-avoidance tax proposals.
"After careful consideration of the report, government announced certain decisions on January 14, 2013 which were widely welcomed. I propose to incorporate those decisions in the Income-Tax Act," Chidambaram said while presenting the Budget for 2013-14.
"I propose to bring the modified provisions into effect from April 1, 2016," Chidambaram said.
The modified provisions, the Finance Minister said, preserve the basic thrust and purpose of GAAR.
He said impermissible tax avoidance arrangements will be subjected to tax after a determination is made through a well laid out procedure involving an assessing officer and an Approving Panel headed by a Judge.
The Minister further said that a stable tax regime, non- adversarial tax administration, fair mechanism for dispute resolution, and an independent judiciary, will provide great assurance and these are the "underlying theme" of his tax proposals.
Stressing that an emerging economy must have a tax system that reflects best global practices, he also said the Finance Bill 2013-14 proposes to set up a commission for bringing about reforms in tax administration.
"I propose to set up a Tax Administration Reform Commission to review the application of tax policies and tax laws and submit periodic reports that can be implemented to strengthen the capacity of our tax system," he said.
The Minister, in his about 1 hour and 45 minutes Budget speech, also said that the Financial Sector Legislative Reforms Commission (FSLRC) constituted in 2011 will present its report next month.
"It is our intention to examine the recommendations and act quickly and decisively so that our financial sector stands on sound legal foundations and remains well-regulated, efficient and internationally competitive," he added.
He also proposed to constitute a Standing Council of Experts in the Finance Ministry to analyse the international competitiveness of the Indian financial sector.
It will periodically examine the transaction costs of doing business in the Indian market, and provide inputs to Government for necessary action.