The Government may announce the final General Anti-Avoidance Rules (GAAR) within the next 10 days.

Finance Minister P. Chidambaram said on Friday that, “A decision has been taken on GAAR. The draft has been sent to the Prime Minister. Hopefully, the decision will be made public in the next 7-10 days.” However, he did not give any details.

The final rules are expected to be based on the recommendations made by the Shome Committee in its draft report. The draft report was submitted on September 1. The committee suggested delaying implementation of GAAR by three years. It also advised abolition of capital gains tax on selling listed shares.

While arguing for deferment, the Committee had said that GAAR was an extremely advanced instrument of tax administration – one of deterrence, rather than revenue generation – for which intensive training of tax officers, who would specialise in the finer aspects of international taxation, was needed.

The experience with international taxation, such as transfer pricing, as well as the thin training module in specialised fields for Indian tax officers, increasingly in contrast to international benchmarked modules, pose administrative challenges, as pointed out by most stakeholders.

This does not guarantee that an environment of certainty can be regenerated with an immediate application of GAAR, however modified, it explained.

Also the tax expenditure for not implementing GAAR (after a requisite threshold is applied) would be minimal. Hence, GAAR should be deferred for three years, and should be announced in 2016-17. In effect, therefore, GAAR would apply from assessment year 2017-18.

“Pre-announcement is a common practice internationally, in today’s global environment of freely flowing capital,” it said.

The committee had advocated abolishing the tax on gains arising from transfer of listed securities, whether in the nature of capital gains or business income, to both residents and non-residents. The existing law prescribes tax at the rate of 15 per cent for such gains.

> shishir.sinha@thehindu.co.in