The government should put off implementation of General Anti-Avoidance Rules (GAAR) until 2015 as these have created a bad perception about Indian tax laws among global investors,Assocham said today.
“GAAR have serious implications for the tax-payers and investors – both domestic and global. No rush job should be done because India cannot afford to send a signal suggesting there is no stability in taxation policies,” Assocham President Rajkumar N Dhoot said in a statement.
The government must discuss every parameter of GAAR with industry,tax planners,legal professionals and tax administrators,so that a well thought proposal is placed before Parliament,he said.
He added that since it would be a big exercise,one year’s time for implementing it is not good enough.
“As GAAR have created bad perception about the Indian tax laws among global investors,the proposal should be put off well beyond April,2013 and at least up to 2015,” Dhoot said.
He also said the timing to implement GAAR is not correct. India cannot afford to scare away investors in stock market when halting capital outflow and sliding rupee are big concerns.
Terming foreign institutional investors “a touchy tribe of investors” it pointed towards perceptions made and destroyed by FIIs about countries in short times and said the negative perception will feed on itself and influence the credit rating agencies which has been seen already in case of India.
The industry body has also urged Prime Minister Manmohan Singh,who is also handling the finance portfolio,to overhaul country’s tax administration for a transparent,less discretionary and inspector raj free” regime.
He said the introduction of goods and services tax would be a landmark that can bring drastic changes in the tax administration.
In-so-far as the debate on tax avoidance is concerned,the guiding principle should be incentivising the savings and investment,Dhoot said.
“If the tax breaks are given to promote savings and investment,tax-payers should be free to do his tax-planning in a manner that he saves to invest in nation-building. That should not be taken as tax avoidance and should not attract the much-feared GAAR”.
India would continue to need huge investment for growth and equity. It has to largely come from domestic sources. FIIs and FDI will also complement the domestic sources,Dhoot said.