SlideShare a Scribd company logo
1 of 23
Download to read offline
Indian General
Anti-Avoidance
Rules
An Overview
Dinesh Kanabar
7 July 2012
How it all Started?

2
Evolution

Pre-GAAR Era

Jurisprudence

Tax Planning vs. Tax Avoidance vs.
Tax Evasion / Form vs. Substance
Treaty Shopping

Specific
Anti-avoidance
Rules

Thin Capitalization

© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

3
Tax Planning vs. Tax Avoidance vs. Tax Evasion

‘Roller Coaster’ from “post-independence” to 2011…… 60+
years … 7 Apex Court decisions !!

Arvind
Narottam

1967

Azadi Bachao
Andolan

1988

Raman & Co.

2003

1985
McDowell

© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

1989
Playworld
Electronics

Vodafone

2012

2010
Walfort

4
Tax Planning vs. Tax Avoidance vs. Tax Evasion

Raman & Co. (1967)
“Avoidance of tax liability by so arranging commercial affairs
that charge of tax is distributed is not prohibited. A taxpayer
may resort to a device to divert the income before it accrues
or arises to him. Effectiveness of the device depends not
upon considerations of morality, but on the operation of the
Income-tax Act. Legislative injuction in taxing statues may
not, except on peril of penalty, be violated, but it may lawfully
circumvented”

© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

5
Tax Planning vs. Tax Avoidance vs. Tax Evasion

McDowell (1985): “Constitutional Bench” decision

“Main” judgment of Ranganath Misra (on behalf of Full Court)
 Permissible: Tax planning within legal framework
 Impermissible: ‘‘Colourable devices’, ‘dubious methods’
and ‘subterfuges’ under the guise of planning
“Supplementing” decision by Chinappa Reddy ( post
concurrence with “majority” decision!!)
Blurred distinction between “tax avoidance” and “tax
evasion”
Dismissed observations in Raman & Co

Chinappa Reddy’s view:
Reopened debate of Ramsay vs. Duke of Westminister
© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

6
Tax Planning vs. Tax Avoidance vs. Tax Evasion
Aftermath of “McDowell”:
‘Implied’ opposition to Chinappa Reddy’s view
Arvind Narottam (1988)

“....no amount of moral sermons would change people’s attitude to tax
avoidance”

Playworld Electronics (1989)

“One should avoid subverting the rule of law”

Battlelines drawn for “correct” reading of McDowell
© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

7
Tax Planning vs. Tax Avoidance vs. Tax Evasion
Azadi Bachao Andolan (2003)
• Chinappa Reddy’s “radical” view militates against the majority
judgment
• Raman & Co (1967) “relevant even today” / Duke of Westminister
“alive” & “kicking”

Every arrangement reducing the tax burden not to be looked down
Attempts to reverse Azadi
• Review petition filed before the two member Supreme Court Bench:
Dismissed in January 2004
• Curative Petition placed before a five member Supreme Court Bench:
Dismissed in limine in December 2004

Correctness of Azadi Bachao Andolan still doubted !!
© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

8
Tax Planning vs. Tax Avoidance vs. Tax Evasion
Walfort (2010) reaffirms Azadi Bachao Andolan

“Even assuming that the transaction was pre-planned there was
nothing to impeach the genuineness of the transaction. With regard to
the ruling in McDowell & Co. Ltd. v. CTO [1985] 154 ITR 1482 (SC), it
may be stated that in the later decision of the Supreme Court in Union
of India v. Azadi Bachao Andolan [2003] 263 ITR 706 it has been held
that a citizen is free to carry on its business within the four corners of
the law. That, mere tax planning, without any motive to evade taxes
through colourable devices

is not frowned upon even by the

judgment of the Supreme Court in McDowell & Co. Ltd.’s case
(supra)”

© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

9
Tax Planning vs. Tax Avoidance vs. Tax Evasion

Vodafone (2012)….finally lays to rest “McDowell spirit”

 No conflict between McDowell and Azadi Bachao Andolan
 Chinappa Reddy’s views only in the context of “artificial and
colourable devices”
 Reaffirmed Westminister: Courts cannot go behind a genuine
document to some supposed underlying substance
 Preferred “look at” over “look through”

© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

10
Tax Planning vs. Tax Avoidance vs. Tax Evasion
-- Post Vodafone...
High Energy Batteries (Madras HC): “Sale and Lease Back”
 Transaction of sale and lease back not sham.
 “Look at” principle applied

AAR Ruling: Buyback of shares
 “Tax Avoidance” / “colourable device”
 Results in “dividend” and not “capital gains”

Debate intensifies ……rather than subsiding !!
© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

11
Treaty Shopping / Thin Capitalisation

Treaty Shopping - Azadi (2003) / Vodafone (2012)
 Treaty Shopping permissible
 Treaty benefit to be denied only on account of LOB Article / Antiavoidance rules in the domestic law

Thin Capitalization - Besix Kier (2010)

 Re-characterization of Debt as equity not permissible in absence
of Thin Capitalization Rules

© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

12
Pre GAAR Era - Specific Anti-avoidance Rules

Deemed Dividend

Clubbing of Income

Stamp duty value of land and building

Deemed Gift

Transfer Pricing

Dividend / Bonus Stripping

© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

13
GAAR – Around the world

 Growing international concern over tax evasion and tax
avoidance
 Global economic slowdown resulting in lower tax
collections – Governments looking to widen tax base

Australia

South Africa

UK (Proposed)

2006

1981

2011
GAAR

1988
Canada

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.

2008
China

2013
India

14
Indian GAAR

15
Evolution of GAAR

es
lin
de
ui
12
G
e
n
ft
ra
Ju
D
28

a
Fin
,
Act

y
Ma

201

12

2

Sta

28

nce

Doctrine of “substance
over form”

ndin
gC
Rep ommit
te e
ort
9M
arch
12

DT
C
DT
20
09
C
20
–
10
12
–
Au
30
g
09
Au
g
10

Finance Bill 2012
16 Mar 12

Modeled on South
African GAAR
© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.

Vodafone’s “six
factor test” nullified

Finance Minister in Budget
Speech

“I propose to introduce GAAR
in order to counter aggressive
tax avoidance schemes….”

Explanatory Memorandum to
Finance Bill, 2012

….keeping in view the aggressive
tax planning with the use of
sophisticated structures, a need for
statutory provisions so as to codify
the doctrine of "substance over
form"……

16
GAAR
-- Comparison of key provisions
Particulars

DTC 2009

Implementation
Date

1 April 2011

DTC 2010

1 April 2012

1 April 2013

Taxpayer

Tax Authorities

Taxpayer

Taxpayer

Scope

Wide

Wide

Reference to
approving
panel

NO

Commissioner

Option to
obtain AAR
ruling
© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.

NO

Finance Act
2012

1 April 2012

Onus of
proof

Final authority
to invoke
GAAR

Finance Bill
2012

NO

Commissioner

NO

Wider than DTC

Wider than DTC

yes

yes

Approving Panel
(Only
Commissioners)

Approving Panel
(Commissioners
+ Jt.Secratary)

NO

YES

17
Indian GAAR – A Snapshot
“Main purpose” or one of the “main purposes” is to obtain a “tax benefit”
AND

Not at
“arm’s-length”

OR

“Misuse/abuse" of
tax provisions

OR

Lacks “commercial
substance”

OR

Not for bona-fide
purposes

Impermissible Avoidance Arrangement (IAA)

Consequences

Disregard / combine /
re-characterize whole /
part of the arrangement

Disregard
corporate
structure

Deny treaty
benefit

Re-assign place
of residence /
situs of assets or
transaction

Re-allocate
income,
expenses, relief,
etc.

Re- characterize
Equity- Debt, Income,
Expenses, relief, etc.

Applies to both Indian Residents and Non-Residents
GAAR to override Treaties
© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.

18
GAAR Guidelines

 Committee formed under the chairmanship of DGIT (IT)
 “Draft” guidelines
 Issued on 28 June 2012 with 21 illustration:
 PM’s review pending…. Will GAARs be….deferred....diluted…. or
deleted?
 Positives
 Clarity in meaning of “connected person”
 GAARs to apply to FIIs and not to “P-Note” holders
 Obliterating fears on section 96(2): Consequences of treating part of an
arrangement as “impermissible”
 “Tax Mitigation” permissible
 Thin Capitalisation applicable only qua “connected persons”
 Overseas investments: Non-applicability of GAARs to parking of
dividends
2% Rise in rupee… 439 points rise in BSE Sensex on 29 June!!
© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.

19
More to be done

Increased objectivity

Define “direct or indirect” / “misuse or abuse” / “bonafide
purpose” / “commercial substance”

Recommendation of Parliamentary Standing Committee:
Interplay of GAARs and Tax Treaties

Increased clarity on GAARs vs. SAARs

Key: Implementation at
“ground level” / Increase
India’s attractiveness as an
investment destination
© 2012 KPMG, an Indian Partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.

Grandfathering: Non-applicability to “pre-2013”
structures

20
Hope is eternal…
Finance Minister’s Speech while introducing GAAR provisions
“I propose to introduce a General Anti-Avoidance Rule in order to counter aggressive tax avoidance
schemes, while ensuring that it is used only in appropriate cases, by enabling a review by a GAAR panel”

Finance Minister during in Lok Sabha debate
“… It is not made for harassment. It is not for harassing the honest taxpayers but we shall have to take
action against those who are taking advantage to avoid taxes…”

Parliamentary Standing Committee Report
Due consultative process with all stakeholders would be followed before guidelines will be formulated

Finance Secretary to ET (7 May 2012):
"It won't be easy for assessing tax officers to invoke GAAR”
© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.

21
Questions
…

Answers…

&
© 2012 KPMG, an Indian Partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss Private Limited, an reserved. limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
© 2009 KPMG India entity. All rights Indian private

22
22
Thank You

The information contained herein is of a general nature. The content provided here treats the subjects covered here in condensed form. It is intended to provide a
general guide to the subject matter and should not be relied on as a basis for business decisions. A detailed analysis of the tax and regulatory implications should be
done prior to implementation in order to determine the feasibility of the transaction at the time of implementation.
Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will
continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular
situation. Specialist advice should be sought with respect to any individual circumstances.
© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
23

More Related Content

What's hot (20)

Customs Duty notes
Customs Duty notesCustoms Duty notes
Customs Duty notes
 
Prohibitions and restriction on import and export of goods
Prohibitions and restriction  on import and export of goodsProhibitions and restriction  on import and export of goods
Prohibitions and restriction on import and export of goods
 
Baggage
BaggageBaggage
Baggage
 
Clearance of import and export goods customs law
Clearance of import and export goods   customs lawClearance of import and export goods   customs law
Clearance of import and export goods customs law
 
Double taxation
Double taxationDouble taxation
Double taxation
 
Central Sales Tax
Central Sales Tax Central Sales Tax
Central Sales Tax
 
Customs Duty
Customs DutyCustoms Duty
Customs Duty
 
Indirect taxes
Indirect taxesIndirect taxes
Indirect taxes
 
Taxation law
Taxation lawTaxation law
Taxation law
 
Customs duty classification
Customs duty classificationCustoms duty classification
Customs duty classification
 
Customs act 1962
Customs act 1962Customs act 1962
Customs act 1962
 
Wealth tax
Wealth taxWealth tax
Wealth tax
 
Customs duty ppt
Customs duty ppt Customs duty ppt
Customs duty ppt
 
Double Taxation Avoidance Agreement - DTAA
Double Taxation Avoidance Agreement - DTAADouble Taxation Avoidance Agreement - DTAA
Double Taxation Avoidance Agreement - DTAA
 
Types of duty and duty drawback
Types of duty and duty drawbackTypes of duty and duty drawback
Types of duty and duty drawback
 
Customs duty
Customs dutyCustoms duty
Customs duty
 
Impact of Goods & services Tax in India
Impact of Goods & services Tax in IndiaImpact of Goods & services Tax in India
Impact of Goods & services Tax in India
 
Taxation of agricultural income
Taxation of agricultural incomeTaxation of agricultural income
Taxation of agricultural income
 
Set off and carry forward of losses
Set off and carry forward of lossesSet off and carry forward of losses
Set off and carry forward of losses
 
Fera and fema
Fera and femaFera and fema
Fera and fema
 

Viewers also liked

GAAR India and International perspective
GAAR India and International perspectiveGAAR India and International perspective
GAAR India and International perspectiveVIJAY KAMBOJ
 
General anti avoidance rule(gaar)
General anti avoidance rule(gaar)General anti avoidance rule(gaar)
General anti avoidance rule(gaar)Wordpandit
 
Pres 21-mitocondrias y respiracion celular
Pres 21-mitocondrias y respiracion celularPres 21-mitocondrias y respiracion celular
Pres 21-mitocondrias y respiracion celularroberto142
 
Эффективный e-mail-маркетинг: автоматизация сохранит рекламный бюджет
Эффективный e-mail-маркетинг: автоматизация сохранит рекламный бюджетЭффективный e-mail-маркетинг: автоматизация сохранит рекламный бюджет
Эффективный e-mail-маркетинг: автоматизация сохранит рекламный бюджетAstra Media Group, Russia
 
Rani Raikwad - Strongest Women in India - Truck Pulling World Record Holder
Rani Raikwad - Strongest Women in India - Truck Pulling World Record HolderRani Raikwad - Strongest Women in India - Truck Pulling World Record Holder
Rani Raikwad - Strongest Women in India - Truck Pulling World Record HolderDemotix
 
EMIS Workshop - Ralph Sullivan
EMIS Workshop - Ralph SullivanEMIS Workshop - Ralph Sullivan
EMIS Workshop - Ralph SullivanStraight Talkers
 
Control Quimico del Pulgon Verde Schizaphis graminum
Control Quimico del Pulgon Verde Schizaphis graminumControl Quimico del Pulgon Verde Schizaphis graminum
Control Quimico del Pulgon Verde Schizaphis graminumIgor Davalos Rojas
 
Programa Superior en Big Data
Programa Superior en Big DataPrograma Superior en Big Data
Programa Superior en Big DataICEMD
 
¿Qué se come en las distintas regiones de España? ¡Salimos de La Cocina de Ja...
¿Qué se come en las distintas regiones de España? ¡Salimos de La Cocina de Ja...¿Qué se come en las distintas regiones de España? ¡Salimos de La Cocina de Ja...
¿Qué se come en las distintas regiones de España? ¡Salimos de La Cocina de Ja...Jaime Castellanos
 
Gaar – general anti – avoidance rules gbr
Gaar – general anti – avoidance rules   gbrGaar – general anti – avoidance rules   gbr
Gaar – general anti – avoidance rules gbrRamya Basavaraja
 
Gaar 27 mar12
Gaar 27 mar12Gaar 27 mar12
Gaar 27 mar12krmhomji
 
General anti-avoidance-rules-suggestions
General anti-avoidance-rules-suggestionsGeneral anti-avoidance-rules-suggestions
General anti-avoidance-rules-suggestionsSandeep Gupta
 
General anti avoidance rules(GAAR) in India
General anti avoidance rules(GAAR) in IndiaGeneral anti avoidance rules(GAAR) in India
General anti avoidance rules(GAAR) in IndiaCol Mukteshwar Prasad
 

Viewers also liked (20)

Understanding GAAR
Understanding GAARUnderstanding GAAR
Understanding GAAR
 
GAAR India and International perspective
GAAR India and International perspectiveGAAR India and International perspective
GAAR India and International perspective
 
Gaar
GaarGaar
Gaar
 
GAAR || Budget 2017
GAAR || Budget 2017GAAR || Budget 2017
GAAR || Budget 2017
 
GAAR
GAARGAAR
GAAR
 
Gaar
GaarGaar
Gaar
 
GAAR: THE PAST, PRESENT AND FUTURE
GAAR: THE PAST, PRESENT AND FUTUREGAAR: THE PAST, PRESENT AND FUTURE
GAAR: THE PAST, PRESENT AND FUTURE
 
General anti avoidance rule(gaar)
General anti avoidance rule(gaar)General anti avoidance rule(gaar)
General anti avoidance rule(gaar)
 
Pres 21-mitocondrias y respiracion celular
Pres 21-mitocondrias y respiracion celularPres 21-mitocondrias y respiracion celular
Pres 21-mitocondrias y respiracion celular
 
Эффективный e-mail-маркетинг: автоматизация сохранит рекламный бюджет
Эффективный e-mail-маркетинг: автоматизация сохранит рекламный бюджетЭффективный e-mail-маркетинг: автоматизация сохранит рекламный бюджет
Эффективный e-mail-маркетинг: автоматизация сохранит рекламный бюджет
 
Rani Raikwad - Strongest Women in India - Truck Pulling World Record Holder
Rani Raikwad - Strongest Women in India - Truck Pulling World Record HolderRani Raikwad - Strongest Women in India - Truck Pulling World Record Holder
Rani Raikwad - Strongest Women in India - Truck Pulling World Record Holder
 
EMIS Workshop - Ralph Sullivan
EMIS Workshop - Ralph SullivanEMIS Workshop - Ralph Sullivan
EMIS Workshop - Ralph Sullivan
 
Control Quimico del Pulgon Verde Schizaphis graminum
Control Quimico del Pulgon Verde Schizaphis graminumControl Quimico del Pulgon Verde Schizaphis graminum
Control Quimico del Pulgon Verde Schizaphis graminum
 
Programa Superior en Big Data
Programa Superior en Big DataPrograma Superior en Big Data
Programa Superior en Big Data
 
¿Qué se come en las distintas regiones de España? ¡Salimos de La Cocina de Ja...
¿Qué se come en las distintas regiones de España? ¡Salimos de La Cocina de Ja...¿Qué se come en las distintas regiones de España? ¡Salimos de La Cocina de Ja...
¿Qué se come en las distintas regiones de España? ¡Salimos de La Cocina de Ja...
 
Gaar – general anti – avoidance rules gbr
Gaar – general anti – avoidance rules   gbrGaar – general anti – avoidance rules   gbr
Gaar – general anti – avoidance rules gbr
 
Gaar 27 mar12
Gaar 27 mar12Gaar 27 mar12
Gaar 27 mar12
 
General anti-avoidance-rules-suggestions
General anti-avoidance-rules-suggestionsGeneral anti-avoidance-rules-suggestions
General anti-avoidance-rules-suggestions
 
General anti avoidance rules(GAAR) in India
General anti avoidance rules(GAAR) in IndiaGeneral anti avoidance rules(GAAR) in India
General anti avoidance rules(GAAR) in India
 
102352485 gaar
102352485 gaar102352485 gaar
102352485 gaar
 

Similar to Gaar ppt

BEPS presentation -Final - Copy
BEPS presentation -Final - CopyBEPS presentation -Final - Copy
BEPS presentation -Final - CopyPradeep A
 
Kpmg in india is one of the leading providers of risk
Kpmg in india is one of the leading providers of riskKpmg in india is one of the leading providers of risk
Kpmg in india is one of the leading providers of riskTyagi Munda Ankush
 
HDG - Base Erosion & Profit Shifting (BEPS) - Conceptual Analysis & Country b...
HDG - Base Erosion & Profit Shifting (BEPS) - Conceptual Analysis & Country b...HDG - Base Erosion & Profit Shifting (BEPS) - Conceptual Analysis & Country b...
HDG - Base Erosion & Profit Shifting (BEPS) - Conceptual Analysis & Country b...Hitesh Gajaria
 
Guide for Creating a Global Structure Using Holding Company
Guide for Creating a Global Structure Using Holding CompanyGuide for Creating a Global Structure Using Holding Company
Guide for Creating a Global Structure Using Holding CompanyAnil Chawla
 
presentation-kpmg-industry-4-0-digital-scm-for-enabling-growt-2019.pdf
presentation-kpmg-industry-4-0-digital-scm-for-enabling-growt-2019.pdfpresentation-kpmg-industry-4-0-digital-scm-for-enabling-growt-2019.pdf
presentation-kpmg-industry-4-0-digital-scm-for-enabling-growt-2019.pdfSandeepMandal42
 
The Limited Partnership Act 2008 Essay
The Limited Partnership Act 2008 EssayThe Limited Partnership Act 2008 Essay
The Limited Partnership Act 2008 EssayLisa Fields
 
International Transactions-Transfer Pricing
International Transactions-Transfer PricingInternational Transactions-Transfer Pricing
International Transactions-Transfer PricingTAXPERT PROFESSIONALS
 
Blending Longview Tax With External Applications For Operational Synergies &a...
Blending Longview Tax With External Applications For Operational Synergies &a...Blending Longview Tax With External Applications For Operational Synergies &a...
Blending Longview Tax With External Applications For Operational Synergies &a...philparkinson
 
HSP Webinar: Doing Business in India
HSP Webinar: Doing Business in IndiaHSP Webinar: Doing Business in India
HSP Webinar: Doing Business in Indiahspblog
 
Cayman Compliant Series - Economic Substance 3.0
Cayman Compliant Series - Economic Substance 3.0Cayman Compliant Series - Economic Substance 3.0
Cayman Compliant Series - Economic Substance 3.0Ramona Tudorancea
 
ALM - JSA Presentation Octber 28 2015 (New York)
ALM - JSA Presentation Octber 28 2015 (New York)ALM - JSA Presentation Octber 28 2015 (New York)
ALM - JSA Presentation Octber 28 2015 (New York)Nitin Potdar
 
Investment and Tax Treaty
Investment and Tax TreatyInvestment and Tax Treaty
Investment and Tax Treatyssusere74c42
 
Guide to start a business in india
Guide to start a business in indiaGuide to start a business in india
Guide to start a business in indiaCompaniesInn.com LLP
 
Manjit advisory 2010 2011
Manjit advisory 2010 2011Manjit advisory 2010 2011
Manjit advisory 2010 2011mkalha
 

Similar to Gaar ppt (20)

BEPS presentation -Final - Copy
BEPS presentation -Final - CopyBEPS presentation -Final - Copy
BEPS presentation -Final - Copy
 
KPMG road2 indiaxl_7nov2017
KPMG road2 indiaxl_7nov2017KPMG road2 indiaxl_7nov2017
KPMG road2 indiaxl_7nov2017
 
Kpmg in india is one of the leading providers of risk
Kpmg in india is one of the leading providers of riskKpmg in india is one of the leading providers of risk
Kpmg in india is one of the leading providers of risk
 
HDG - Base Erosion & Profit Shifting (BEPS) - Conceptual Analysis & Country b...
HDG - Base Erosion & Profit Shifting (BEPS) - Conceptual Analysis & Country b...HDG - Base Erosion & Profit Shifting (BEPS) - Conceptual Analysis & Country b...
HDG - Base Erosion & Profit Shifting (BEPS) - Conceptual Analysis & Country b...
 
Guide for Creating a Global Structure Using Holding Company
Guide for Creating a Global Structure Using Holding CompanyGuide for Creating a Global Structure Using Holding Company
Guide for Creating a Global Structure Using Holding Company
 
presentation-kpmg-industry-4-0-digital-scm-for-enabling-growt-2019.pdf
presentation-kpmg-industry-4-0-digital-scm-for-enabling-growt-2019.pdfpresentation-kpmg-industry-4-0-digital-scm-for-enabling-growt-2019.pdf
presentation-kpmg-industry-4-0-digital-scm-for-enabling-growt-2019.pdf
 
The Limited Partnership Act 2008 Essay
The Limited Partnership Act 2008 EssayThe Limited Partnership Act 2008 Essay
The Limited Partnership Act 2008 Essay
 
International Transactions-Transfer Pricing
International Transactions-Transfer PricingInternational Transactions-Transfer Pricing
International Transactions-Transfer Pricing
 
Blending Longview Tax With External Applications For Operational Synergies &a...
Blending Longview Tax With External Applications For Operational Synergies &a...Blending Longview Tax With External Applications For Operational Synergies &a...
Blending Longview Tax With External Applications For Operational Synergies &a...
 
HSP Webinar: Doing Business in India
HSP Webinar: Doing Business in IndiaHSP Webinar: Doing Business in India
HSP Webinar: Doing Business in India
 
Cayman Compliant Series - Economic Substance 3.0
Cayman Compliant Series - Economic Substance 3.0Cayman Compliant Series - Economic Substance 3.0
Cayman Compliant Series - Economic Substance 3.0
 
Intermediary Holding & Licensing Companies
Intermediary Holding & Licensing CompaniesIntermediary Holding & Licensing Companies
Intermediary Holding & Licensing Companies
 
News letter - November 2012
News letter - November 2012News letter - November 2012
News letter - November 2012
 
Mergers
MergersMergers
Mergers
 
dttl_cop18_doha_brief
dttl_cop18_doha_briefdttl_cop18_doha_brief
dttl_cop18_doha_brief
 
ALM - JSA Presentation Octber 28 2015 (New York)
ALM - JSA Presentation Octber 28 2015 (New York)ALM - JSA Presentation Octber 28 2015 (New York)
ALM - JSA Presentation Octber 28 2015 (New York)
 
Investment and Tax Treaty
Investment and Tax TreatyInvestment and Tax Treaty
Investment and Tax Treaty
 
Guide to start a business in india
Guide to start a business in indiaGuide to start a business in india
Guide to start a business in india
 
Mergers & Acquisitions Newsletter - November 2011
Mergers & Acquisitions Newsletter - November 2011 Mergers & Acquisitions Newsletter - November 2011
Mergers & Acquisitions Newsletter - November 2011
 
Manjit advisory 2010 2011
Manjit advisory 2010 2011Manjit advisory 2010 2011
Manjit advisory 2010 2011
 

More from Ujjwal 'Shanu' (20)

Risk return trade off
Risk return trade offRisk return trade off
Risk return trade off
 
Risk perceprtion of ads of infosys
Risk perceprtion of ads of infosysRisk perceprtion of ads of infosys
Risk perceprtion of ads of infosys
 
Mutual funds
Mutual fundsMutual funds
Mutual funds
 
Corporate governance
Corporate governanceCorporate governance
Corporate governance
 
Whistle blower final
Whistle blower finalWhistle blower final
Whistle blower final
 
M&a
M&aM&a
M&a
 
T test
T testT test
T test
 
Research design
Research designResearch design
Research design
 
Business research
Business researchBusiness research
Business research
 
Measurement and scaling techniques
Measurement  and  scaling  techniquesMeasurement  and  scaling  techniques
Measurement and scaling techniques
 
Taxation
TaxationTaxation
Taxation
 
Shri palaniappan chidambram
Shri palaniappan chidambramShri palaniappan chidambram
Shri palaniappan chidambram
 
Planning
PlanningPlanning
Planning
 
Merger & acquisition
Merger & acquisitionMerger & acquisition
Merger & acquisition
 
Rbi
RbiRbi
Rbi
 
Production theory
Production theoryProduction theory
Production theory
 
Perfect competition
Perfect competitionPerfect competition
Perfect competition
 
Oligopoly
OligopolyOligopoly
Oligopoly
 
National income
National incomeNational income
National income
 
Monopoly
MonopolyMonopoly
Monopoly
 

Recently uploaded

NIST Cybersecurity Framework (CSF) 2.0 Workshop
NIST Cybersecurity Framework (CSF) 2.0 WorkshopNIST Cybersecurity Framework (CSF) 2.0 Workshop
NIST Cybersecurity Framework (CSF) 2.0 WorkshopBachir Benyammi
 
UWB Technology for Enhanced Indoor and Outdoor Positioning in Physiological M...
UWB Technology for Enhanced Indoor and Outdoor Positioning in Physiological M...UWB Technology for Enhanced Indoor and Outdoor Positioning in Physiological M...
UWB Technology for Enhanced Indoor and Outdoor Positioning in Physiological M...UbiTrack UK
 
Apres-Cyber - The Data Dilemma: Bridging Offensive Operations and Machine Lea...
Apres-Cyber - The Data Dilemma: Bridging Offensive Operations and Machine Lea...Apres-Cyber - The Data Dilemma: Bridging Offensive Operations and Machine Lea...
Apres-Cyber - The Data Dilemma: Bridging Offensive Operations and Machine Lea...Will Schroeder
 
COMPUTER 10: Lesson 7 - File Storage and Online Collaboration
COMPUTER 10: Lesson 7 - File Storage and Online CollaborationCOMPUTER 10: Lesson 7 - File Storage and Online Collaboration
COMPUTER 10: Lesson 7 - File Storage and Online Collaborationbruanjhuli
 
UiPath Studio Web workshop series - Day 7
UiPath Studio Web workshop series - Day 7UiPath Studio Web workshop series - Day 7
UiPath Studio Web workshop series - Day 7DianaGray10
 
Nanopower In Semiconductor Industry.pdf
Nanopower  In Semiconductor Industry.pdfNanopower  In Semiconductor Industry.pdf
Nanopower In Semiconductor Industry.pdfPedro Manuel
 
Cybersecurity Workshop #1.pptx
Cybersecurity Workshop #1.pptxCybersecurity Workshop #1.pptx
Cybersecurity Workshop #1.pptxGDSC PJATK
 
Meet the new FSP 3000 M-Flex800™
Meet the new FSP 3000 M-Flex800™Meet the new FSP 3000 M-Flex800™
Meet the new FSP 3000 M-Flex800™Adtran
 
Designing A Time bound resource download URL
Designing A Time bound resource download URLDesigning A Time bound resource download URL
Designing A Time bound resource download URLRuncy Oommen
 
Anypoint Code Builder , Google Pub sub connector and MuleSoft RPA
Anypoint Code Builder , Google Pub sub connector and MuleSoft RPAAnypoint Code Builder , Google Pub sub connector and MuleSoft RPA
Anypoint Code Builder , Google Pub sub connector and MuleSoft RPAshyamraj55
 
Basic Building Blocks of Internet of Things.
Basic Building Blocks of Internet of Things.Basic Building Blocks of Internet of Things.
Basic Building Blocks of Internet of Things.YounusS2
 
Building AI-Driven Apps Using Semantic Kernel.pptx
Building AI-Driven Apps Using Semantic Kernel.pptxBuilding AI-Driven Apps Using Semantic Kernel.pptx
Building AI-Driven Apps Using Semantic Kernel.pptxUdaiappa Ramachandran
 
20230202 - Introduction to tis-py
20230202 - Introduction to tis-py20230202 - Introduction to tis-py
20230202 - Introduction to tis-pyJamie (Taka) Wang
 
UiPath Platform: The Backend Engine Powering Your Automation - Session 1
UiPath Platform: The Backend Engine Powering Your Automation - Session 1UiPath Platform: The Backend Engine Powering Your Automation - Session 1
UiPath Platform: The Backend Engine Powering Your Automation - Session 1DianaGray10
 
Linked Data in Production: Moving Beyond Ontologies
Linked Data in Production: Moving Beyond OntologiesLinked Data in Production: Moving Beyond Ontologies
Linked Data in Production: Moving Beyond OntologiesDavid Newbury
 
Videogame localization & technology_ how to enhance the power of translation.pdf
Videogame localization & technology_ how to enhance the power of translation.pdfVideogame localization & technology_ how to enhance the power of translation.pdf
Videogame localization & technology_ how to enhance the power of translation.pdfinfogdgmi
 
VoIP Service and Marketing using Odoo and Asterisk PBX
VoIP Service and Marketing using Odoo and Asterisk PBXVoIP Service and Marketing using Odoo and Asterisk PBX
VoIP Service and Marketing using Odoo and Asterisk PBXTarek Kalaji
 
OpenShift Commons Paris - Choose Your Own Observability Adventure
OpenShift Commons Paris - Choose Your Own Observability AdventureOpenShift Commons Paris - Choose Your Own Observability Adventure
OpenShift Commons Paris - Choose Your Own Observability AdventureEric D. Schabell
 

Recently uploaded (20)

NIST Cybersecurity Framework (CSF) 2.0 Workshop
NIST Cybersecurity Framework (CSF) 2.0 WorkshopNIST Cybersecurity Framework (CSF) 2.0 Workshop
NIST Cybersecurity Framework (CSF) 2.0 Workshop
 
UWB Technology for Enhanced Indoor and Outdoor Positioning in Physiological M...
UWB Technology for Enhanced Indoor and Outdoor Positioning in Physiological M...UWB Technology for Enhanced Indoor and Outdoor Positioning in Physiological M...
UWB Technology for Enhanced Indoor and Outdoor Positioning in Physiological M...
 
Apres-Cyber - The Data Dilemma: Bridging Offensive Operations and Machine Lea...
Apres-Cyber - The Data Dilemma: Bridging Offensive Operations and Machine Lea...Apres-Cyber - The Data Dilemma: Bridging Offensive Operations and Machine Lea...
Apres-Cyber - The Data Dilemma: Bridging Offensive Operations and Machine Lea...
 
COMPUTER 10: Lesson 7 - File Storage and Online Collaboration
COMPUTER 10: Lesson 7 - File Storage and Online CollaborationCOMPUTER 10: Lesson 7 - File Storage and Online Collaboration
COMPUTER 10: Lesson 7 - File Storage and Online Collaboration
 
UiPath Studio Web workshop series - Day 7
UiPath Studio Web workshop series - Day 7UiPath Studio Web workshop series - Day 7
UiPath Studio Web workshop series - Day 7
 
Nanopower In Semiconductor Industry.pdf
Nanopower  In Semiconductor Industry.pdfNanopower  In Semiconductor Industry.pdf
Nanopower In Semiconductor Industry.pdf
 
Cybersecurity Workshop #1.pptx
Cybersecurity Workshop #1.pptxCybersecurity Workshop #1.pptx
Cybersecurity Workshop #1.pptx
 
20150722 - AGV
20150722 - AGV20150722 - AGV
20150722 - AGV
 
Meet the new FSP 3000 M-Flex800™
Meet the new FSP 3000 M-Flex800™Meet the new FSP 3000 M-Flex800™
Meet the new FSP 3000 M-Flex800™
 
Designing A Time bound resource download URL
Designing A Time bound resource download URLDesigning A Time bound resource download URL
Designing A Time bound resource download URL
 
Anypoint Code Builder , Google Pub sub connector and MuleSoft RPA
Anypoint Code Builder , Google Pub sub connector and MuleSoft RPAAnypoint Code Builder , Google Pub sub connector and MuleSoft RPA
Anypoint Code Builder , Google Pub sub connector and MuleSoft RPA
 
Basic Building Blocks of Internet of Things.
Basic Building Blocks of Internet of Things.Basic Building Blocks of Internet of Things.
Basic Building Blocks of Internet of Things.
 
20230104 - machine vision
20230104 - machine vision20230104 - machine vision
20230104 - machine vision
 
Building AI-Driven Apps Using Semantic Kernel.pptx
Building AI-Driven Apps Using Semantic Kernel.pptxBuilding AI-Driven Apps Using Semantic Kernel.pptx
Building AI-Driven Apps Using Semantic Kernel.pptx
 
20230202 - Introduction to tis-py
20230202 - Introduction to tis-py20230202 - Introduction to tis-py
20230202 - Introduction to tis-py
 
UiPath Platform: The Backend Engine Powering Your Automation - Session 1
UiPath Platform: The Backend Engine Powering Your Automation - Session 1UiPath Platform: The Backend Engine Powering Your Automation - Session 1
UiPath Platform: The Backend Engine Powering Your Automation - Session 1
 
Linked Data in Production: Moving Beyond Ontologies
Linked Data in Production: Moving Beyond OntologiesLinked Data in Production: Moving Beyond Ontologies
Linked Data in Production: Moving Beyond Ontologies
 
Videogame localization & technology_ how to enhance the power of translation.pdf
Videogame localization & technology_ how to enhance the power of translation.pdfVideogame localization & technology_ how to enhance the power of translation.pdf
Videogame localization & technology_ how to enhance the power of translation.pdf
 
VoIP Service and Marketing using Odoo and Asterisk PBX
VoIP Service and Marketing using Odoo and Asterisk PBXVoIP Service and Marketing using Odoo and Asterisk PBX
VoIP Service and Marketing using Odoo and Asterisk PBX
 
OpenShift Commons Paris - Choose Your Own Observability Adventure
OpenShift Commons Paris - Choose Your Own Observability AdventureOpenShift Commons Paris - Choose Your Own Observability Adventure
OpenShift Commons Paris - Choose Your Own Observability Adventure
 

Gaar ppt

  • 2. How it all Started? 2
  • 3. Evolution Pre-GAAR Era Jurisprudence Tax Planning vs. Tax Avoidance vs. Tax Evasion / Form vs. Substance Treaty Shopping Specific Anti-avoidance Rules Thin Capitalization © 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 3
  • 4. Tax Planning vs. Tax Avoidance vs. Tax Evasion ‘Roller Coaster’ from “post-independence” to 2011…… 60+ years … 7 Apex Court decisions !! Arvind Narottam 1967 Azadi Bachao Andolan 1988 Raman & Co. 2003 1985 McDowell © 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 1989 Playworld Electronics Vodafone 2012 2010 Walfort 4
  • 5. Tax Planning vs. Tax Avoidance vs. Tax Evasion Raman & Co. (1967) “Avoidance of tax liability by so arranging commercial affairs that charge of tax is distributed is not prohibited. A taxpayer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not upon considerations of morality, but on the operation of the Income-tax Act. Legislative injuction in taxing statues may not, except on peril of penalty, be violated, but it may lawfully circumvented” © 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 5
  • 6. Tax Planning vs. Tax Avoidance vs. Tax Evasion McDowell (1985): “Constitutional Bench” decision “Main” judgment of Ranganath Misra (on behalf of Full Court)  Permissible: Tax planning within legal framework  Impermissible: ‘‘Colourable devices’, ‘dubious methods’ and ‘subterfuges’ under the guise of planning “Supplementing” decision by Chinappa Reddy ( post concurrence with “majority” decision!!) Blurred distinction between “tax avoidance” and “tax evasion” Dismissed observations in Raman & Co Chinappa Reddy’s view: Reopened debate of Ramsay vs. Duke of Westminister © 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 6
  • 7. Tax Planning vs. Tax Avoidance vs. Tax Evasion Aftermath of “McDowell”: ‘Implied’ opposition to Chinappa Reddy’s view Arvind Narottam (1988) “....no amount of moral sermons would change people’s attitude to tax avoidance” Playworld Electronics (1989) “One should avoid subverting the rule of law” Battlelines drawn for “correct” reading of McDowell © 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 7
  • 8. Tax Planning vs. Tax Avoidance vs. Tax Evasion Azadi Bachao Andolan (2003) • Chinappa Reddy’s “radical” view militates against the majority judgment • Raman & Co (1967) “relevant even today” / Duke of Westminister “alive” & “kicking” Every arrangement reducing the tax burden not to be looked down Attempts to reverse Azadi • Review petition filed before the two member Supreme Court Bench: Dismissed in January 2004 • Curative Petition placed before a five member Supreme Court Bench: Dismissed in limine in December 2004 Correctness of Azadi Bachao Andolan still doubted !! © 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 8
  • 9. Tax Planning vs. Tax Avoidance vs. Tax Evasion Walfort (2010) reaffirms Azadi Bachao Andolan “Even assuming that the transaction was pre-planned there was nothing to impeach the genuineness of the transaction. With regard to the ruling in McDowell & Co. Ltd. v. CTO [1985] 154 ITR 1482 (SC), it may be stated that in the later decision of the Supreme Court in Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 it has been held that a citizen is free to carry on its business within the four corners of the law. That, mere tax planning, without any motive to evade taxes through colourable devices is not frowned upon even by the judgment of the Supreme Court in McDowell & Co. Ltd.’s case (supra)” © 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 9
  • 10. Tax Planning vs. Tax Avoidance vs. Tax Evasion Vodafone (2012)….finally lays to rest “McDowell spirit”  No conflict between McDowell and Azadi Bachao Andolan  Chinappa Reddy’s views only in the context of “artificial and colourable devices”  Reaffirmed Westminister: Courts cannot go behind a genuine document to some supposed underlying substance  Preferred “look at” over “look through” © 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 10
  • 11. Tax Planning vs. Tax Avoidance vs. Tax Evasion -- Post Vodafone... High Energy Batteries (Madras HC): “Sale and Lease Back”  Transaction of sale and lease back not sham.  “Look at” principle applied AAR Ruling: Buyback of shares  “Tax Avoidance” / “colourable device”  Results in “dividend” and not “capital gains” Debate intensifies ……rather than subsiding !! © 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 11
  • 12. Treaty Shopping / Thin Capitalisation Treaty Shopping - Azadi (2003) / Vodafone (2012)  Treaty Shopping permissible  Treaty benefit to be denied only on account of LOB Article / Antiavoidance rules in the domestic law Thin Capitalization - Besix Kier (2010)  Re-characterization of Debt as equity not permissible in absence of Thin Capitalization Rules © 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 12
  • 13. Pre GAAR Era - Specific Anti-avoidance Rules Deemed Dividend Clubbing of Income Stamp duty value of land and building Deemed Gift Transfer Pricing Dividend / Bonus Stripping © 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 13
  • 14. GAAR – Around the world  Growing international concern over tax evasion and tax avoidance  Global economic slowdown resulting in lower tax collections – Governments looking to widen tax base Australia South Africa UK (Proposed) 2006 1981 2011 GAAR 1988 Canada © 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 2008 China 2013 India 14
  • 16. Evolution of GAAR es lin de ui 12 G e n ft ra Ju D 28 a Fin , Act y Ma 201 12 2 Sta 28 nce Doctrine of “substance over form” ndin gC Rep ommit te e ort 9M arch 12 DT C DT 20 09 C 20 – 10 12 – Au 30 g 09 Au g 10 Finance Bill 2012 16 Mar 12 Modeled on South African GAAR © 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Vodafone’s “six factor test” nullified Finance Minister in Budget Speech “I propose to introduce GAAR in order to counter aggressive tax avoidance schemes….” Explanatory Memorandum to Finance Bill, 2012 ….keeping in view the aggressive tax planning with the use of sophisticated structures, a need for statutory provisions so as to codify the doctrine of "substance over form"…… 16
  • 17. GAAR -- Comparison of key provisions Particulars DTC 2009 Implementation Date 1 April 2011 DTC 2010 1 April 2012 1 April 2013 Taxpayer Tax Authorities Taxpayer Taxpayer Scope Wide Wide Reference to approving panel NO Commissioner Option to obtain AAR ruling © 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NO Finance Act 2012 1 April 2012 Onus of proof Final authority to invoke GAAR Finance Bill 2012 NO Commissioner NO Wider than DTC Wider than DTC yes yes Approving Panel (Only Commissioners) Approving Panel (Commissioners + Jt.Secratary) NO YES 17
  • 18. Indian GAAR – A Snapshot “Main purpose” or one of the “main purposes” is to obtain a “tax benefit” AND Not at “arm’s-length” OR “Misuse/abuse" of tax provisions OR Lacks “commercial substance” OR Not for bona-fide purposes Impermissible Avoidance Arrangement (IAA) Consequences Disregard / combine / re-characterize whole / part of the arrangement Disregard corporate structure Deny treaty benefit Re-assign place of residence / situs of assets or transaction Re-allocate income, expenses, relief, etc. Re- characterize Equity- Debt, Income, Expenses, relief, etc. Applies to both Indian Residents and Non-Residents GAAR to override Treaties © 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 18
  • 19. GAAR Guidelines  Committee formed under the chairmanship of DGIT (IT)  “Draft” guidelines  Issued on 28 June 2012 with 21 illustration:  PM’s review pending…. Will GAARs be….deferred....diluted…. or deleted?  Positives  Clarity in meaning of “connected person”  GAARs to apply to FIIs and not to “P-Note” holders  Obliterating fears on section 96(2): Consequences of treating part of an arrangement as “impermissible”  “Tax Mitigation” permissible  Thin Capitalisation applicable only qua “connected persons”  Overseas investments: Non-applicability of GAARs to parking of dividends 2% Rise in rupee… 439 points rise in BSE Sensex on 29 June!! © 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 19
  • 20. More to be done Increased objectivity Define “direct or indirect” / “misuse or abuse” / “bonafide purpose” / “commercial substance” Recommendation of Parliamentary Standing Committee: Interplay of GAARs and Tax Treaties Increased clarity on GAARs vs. SAARs Key: Implementation at “ground level” / Increase India’s attractiveness as an investment destination © 2012 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Grandfathering: Non-applicability to “pre-2013” structures 20
  • 21. Hope is eternal… Finance Minister’s Speech while introducing GAAR provisions “I propose to introduce a General Anti-Avoidance Rule in order to counter aggressive tax avoidance schemes, while ensuring that it is used only in appropriate cases, by enabling a review by a GAAR panel” Finance Minister during in Lok Sabha debate “… It is not made for harassment. It is not for harassing the honest taxpayers but we shall have to take action against those who are taking advantage to avoid taxes…” Parliamentary Standing Committee Report Due consultative process with all stakeholders would be followed before guidelines will be formulated Finance Secretary to ET (7 May 2012): "It won't be easy for assessing tax officers to invoke GAAR” © 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 21
  • 22. Questions … Answers… & © 2012 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss Private Limited, an reserved. limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. © 2009 KPMG India entity. All rights Indian private 22 22
  • 23. Thank You The information contained herein is of a general nature. The content provided here treats the subjects covered here in condensed form. It is intended to provide a general guide to the subject matter and should not be relied on as a basis for business decisions. A detailed analysis of the tax and regulatory implications should be done prior to implementation in order to determine the feasibility of the transaction at the time of implementation. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. Specialist advice should be sought with respect to any individual circumstances. © 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. 23