More clarity required on GAAR.

The Union Budget for the year had proposed several measures to try and increase foreign investors to invest in India. But it also proposed one big thing that scared FIIs (Foreign Institutional Investors). This proposal was that of GAAR or General Anti Avoidance Rule. The Rule was proposed with the intention of preventing investors from routing money through the tax havens to avoid payment of taxes. Naturally like any individual, FIIs were also unhappy at the prospect of paying more tax. Fortunately like most other ambiguous rules and proposals, GAAR too was deferred to another date. But in a new development the Finance Ministry has proposed a monetary limit on invoking GAAR. Though the ministry has not disclosed the amount of this limit, it has proposed the same in its draft guidelines for GAAR. So all deals over this limit would fall under the purview of GAAR. Also this would be applicable only on those FIIs who choose to take the benefit of double tax avoidance treaties. As such the statement in itself is neither good nor bad. Unless there is more clarity on how GAAR would be invoked there would be no point in reacting to the same. More importantly till there is more clarity on when GAAR would be invoked again there would be no point in reacting to the same.