Controversies continue to chase the General Anti-Avoidance Rules (GAAR) with the Prime Minister’s Office (PMO) today distancing itself from the draft GAAR guidelines issued by the Finance Ministry on Thursday night.
Barely 12 hours after the draft guidelines were released, the PMO issued a statement that the Prime Minister has “not seen” the draft guidelines.
It went on to say that what has been put on the Government Web site from the official level of the Finance Ministry were only ‘draft guidelines’ and that they would be finalised with the approval of the Prime Minister only after considering the feedback of stakeholders.
With Dr Singh holding the Finance portfolio, the PMO’s statement came as a shocker to economy watchers as it reflected a discord between the PMO and the GAAR Panel.
Later in the day, when asked to react to the PMO move, the Finance Secretary, Mr R. S. Gujral, was quite dismissive about the PMO statement and asked newspersons not to read too much into it.
The perplexing question in the minds of economy watchers is how can the Prime Minister, who is holding the Finance portfolio, not be kept in the loop about the thinking of the GAAR panel.
This is more so when it involves a crucial issue like GAAR that is expected to affect international investor community.
Bowing to the concerns expressed by foreign investors on the Budget proposal to implement GAAR from April 1 this year, the then Finance Minister, Mr Pranab Mukherjee, had postponed its implementation by one year to April 1, 2013.
Suggestions invited
Meanwhile, the CBDT on Friday invited comments/suggestions on the draft guidelines on or before July 20.
The draft guidelines provided that GAAR will not be invoked against non-resident investors of FIIs, implying that the P-Note holders will be ring-fenced against any tax liability.
However, foreign institutional investors (FIIs) will clearly not be out of the woods even if the draft rules in the present form are implemented, according to tax experts.