The Government could amend the controversial rules on tax avoidance within 20 days after considering recommendations made by a government panel, Finance Minister P. Chidambaram said on Monday.
The guidelines on General Anti-Avoidance Rules (GAAR) will be based on the suggestions of a committee headed by tax expert Parthasarthi Shome who submitted the final report to Chidambaram earlier today.
"I expect Stage 1-finalisation of our views on the final report (by Shome Committee) to take place in next 10 days. Stage 2-the final GAAR rules would take another 10 days because that would require vetting by the Ministry of Law. So at the moment, I would like to complete Stage 1 and Stage 2 ... that would be (done) by the end of this month," Chidambaram said in New Delhi today.
The Finance Ministry would first finalise its report on GAAR and then consider if there was a necessity to amend the Income Tax Act, Chidambaram said.
"And, the third Stage if it is necessary to amend the IT Act, I am afraid it will certainly take longer because that has to go to Cabinet and the Act has to be amended," he said.
In its draft report, the Shome panel had recommended postponement of the controversial tax provision by three years to April 2016, and abolition of capital gains tax on transfer of securities.
Chidambaram said today that the other report by the Shome panel on indirect transfer of assets by Non-resident Indians (NRIs) would be put up on the Finance Ministry's website for comments.
"As soon as I read it and my department reads it, we will put it on website, invite comments and give about 15 days for feedback and then we will examine ... We will have to read it carefully. We will put in on website as early as possible," he said.
GAAR was proposed in this fiscal's Budget by former Finance Minister and now President, Pranab Mukherjee, aiming to target companies and individuals routing money through tax havens such as Mauritius.
However, the move evoked strong criticism from both within and outside India, prompting overseas investors to put off investments in Indian assets earlier this year and sending stocks lower.
In July, Prime Minister Dr. Manmohan Singh set up a committee headed by Shome to review GAAR guidelines. The Shome panel had submitted its draft report on September 1.
The Government later expanded the scope of the Shome committee on GAAR to include concerns of all non-resident tax payers as well.
In order to assuage concerns of Mauritius-based investors, the Shome panel had suggested that the provisions of the GAAR should not be invoked to "examine the genuineness of the residency of an entity set up in Mauritius".
The Shome panel had also recommended in its draft report that GAAR be applicable only if the monetary threshold of tax benefit is Rs 30mn and more.