FICCI bats for GAAR deferment

The Federation of Indian Chambers of Commerce and Industry (FICCI) has urged the Finance Ministry to defer the introduction of General Anti-Avoidance Rules (GAAR) under the Indian Income-Tax law.

In their pre-Budget interaction with the Revenue Secretary Shaktikanta Das, a high-level FICCI team led by its President Sidharth Birla also pitched for abolition of dividend distribution tax and minimum alternate tax on SEZ developers and units.

What is GAAR?

GAAR is set of rules framed to minimise tax avoidance. Under this concept, tax authorities in a country deny tax benefits for transactions or arrangements that do not have any commercial substance.

The Centre had introduced GAAR to deal with aggressive tax planning involving use of sophisticated structures.

Earlier, GAAR was to be effective from April 1, 2014. Subsequently, the implementation date was deferred to April 1, 2015 (financial year 2015-16).

Special economic zones

FICCI team made a case for reduction of the dividend distribution tax rate from 15 per cent now to 10 per cent.

The exemption, which is currently available with respect to only one level of corporate structure, should be extended for multi-tier corporate structure as well, FICCI has said.

The minimum alternate tax (MAT) should be abolished for both SEZ developers and units, the chamber has suggested.

Also, MAT credit carry forward and set off should be available without any cap on the number of years, FICCI has said.

Indirect transfers

The chamber has suggested several “carve outs” to existing provisions on indirect transfers, including tax exemption in cases where the shares of a foreign company are listed and traded on a stock exchange outside India.

Also, no tax should be imposed on group restructuring, it said.