Government proposes to come out with a modified General Anti-Avoidance Rules by incorporating provisions of the OECD’s BEPS project so as to effectively deal with the problem of tax avoidance by MNCs. The BEPS initiative aims to ensure that taxes are paid where profits are made. Multinational companies use a wide range of cross border tax planning techniques that result in little or tax liability and such results are referred to as ‘Base Erosion and Profit Shifting’.
India has been at the forefront in raising the issues concerning tax avoidance and automatic exchange of information with a view to curbing tax evasion. Finance Minister Arun Jaitley in his Budget for 2015-16 yesterday had postponed by two years to April 1, 2017 the implementation of the controversial GAAR.
It said: “The report on various aspects of BEPS and recommendations regarding the measures to counter it are awaited. It would, therefore, be proper that GAAR provisions are implemented as part of a comprehensive regime to deal with BEPS and aggressive tax avoidance.” The implementation of GAAR provisions has been reviewed and concerns have been expressed regarding certain aspects.
Besides, the BEPS under the Organisation of Economic Cooperation and Development (OECD) is continuing and India is an active participant in the project. The Government had earlier proposed imposing the GAAR from April 1, 2015, for those claiming tax benefit of over Rs 3 crore. The rules are aimed at minimising tax avoidance for investments made by entities based in tax havens. Jaitley had said that general rules of avoidance have now been redefined globally.