The government,in an effort to allay the fears of foreign institutional investors (FIIs) on taxation of short-term capital gains,on Wednesday said that it would soon issue a clarification regarding proposed amendments relating to general anti-avoidance rules (GAAR) once the Finance Bill is passed.
We have clarified verbally our intention. Obviously rules will come (after) the Finance Bill 2012 is passed. Our people are working on the rules. So there wont be any delay after the passage of Finance Bill, Finance Secretary R S Gujral told reporters after a meeting with FIIs.
The FIIs which met the secretary included representatives of JP Morgan,CLSA,Morgan Stanley,Goldman Sachs and Credit Suisse among others. Senior ministry officials along with CBDT Chairman Laxman Das was also present.
The FIIs have been raising their concerns over GAAR soon after the Finance Bill,2012,was tabled in Parliament. They want clarification on permissible activities which will remain out of the purview of the GAAR. In the meeting,they also brought attention to the fact that certain aspects of the proposed law were vague and would give discretionary powers to tax officials.
We told them (FIIs) that we would take those points on board and try and clear them…, Gujral said,adding that the main concern of FIIs relate with short capital gains on equity trading.
Under GAAR,any arrangement made between entities to deliberately avoid tax can be invalidated and would be brought under tax net. However,onus would rely on the taxpayers to prove that the arrangement has not been made to avoid tax.
The announcement over GAAR in this years Budget has alarmed foreign investors,particularly FII,who use PN route (where details of actual investors remains hidden) for making investments in Indian markets.