Implementation of General Anti-Avoidance Rule in Indian tax law

Executive Summary

India introduced General Anti-Avoidance Rules (GAAR) provisions in its tax law in 2012, although they were deferred a couple of times and finally implemented from April 2017. The objective of GAAR is to prevent tax benefits being derived from arrangements that have been entered into with the main purpose of obtaining tax benefits and that lack commercial substance or create rights and obligations not compliant with the arm’s length principle, that result in the misuse of tax law provisions, or are carried out in a manner not ordinarily employed for lawful purposes. The over-arching principal of GAAR provisions is “substance” over “form”.

Around the world, many countries have incorporated anti-avoidance or antiabuse rules into their tax laws. These include Australia, Brazil, Canada, China, France, Germany, Italy, South Africa, South Korea, Sweden, and the UK. In this context, it is helpful to refer to the BEPS initiative introduced by the OECD and G20 countries. Under the BEPS framework, over 100 countries (including non-OECD countries like India) and jurisdictions are collaborating to implement 15 specific action plans to tackle various tax avoidance strategies adopted by taxpayers to avoid or evade tax. Action 6 of the BEPS project seeks to address treaty abuse and over 70 countries have already made a start on the implementation process by signing the Multilateral Instrument, which sets out minimum standards as regards the prevention of treaty abuse.

Performance magazine issue 28, January 2019

Performance is a triannual digest, dedicated to investment management professionals, which brings you the latest articles, news and market developments from Deloitte’s professionals and clients.

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