Pranab amends GAAR proposals: Here are the key takeaways

Amid increasing criticism about obstructing foreign investment, the government on Monday amended the rules for General Anti-Avoidance Rules (GAAR), a move that would bring respite to the investors and industry alike.

GAAR is aimed at curbing tax avoidance by structuring a business or effecting a transaction with the objective of avoiding the tax liability instead of rational commercial considerations.

Finance Minister Pranab Mukherjee while addressing Parliament said the GAAR proposals have been amended to remove the onus on the tax payer.

The implementation of the rule has been deferred by a year and with the fresh amendments, will come into effect from 2014 if passed by the House.

The delay in introduction of measures to crack down on tax evasion is in response to concern among foreign investors that has led to an exodus of funds.

The finance minister also said that tax for NRI investors will be slashed to 10 per cent from 20 per cent.

The industry has been complaining about the provision in GAAR that puts the onus of proof that a transaction was not undertaken to avoid tax on the company or investor concerned.

This is considered against the international practice where the onus to prove that a transaction has been carried out with the sole purpose of avoiding tax is on tax authorities.

In what will come to be another welcome move by jewellery traders, the finance minister has also withdrawn the levy on branded jewellery.

The BSE Sensex reacted positively to the announcement, recovering its heavy losses to trade only 86 points down at 2.42 pm.

Details from Pranab's speech:

• Implementation of GAAR provisions deferred by one year; to be now applicable from 2013-14: Mukherjee.
• Levy on all precious metals, branded or unbranded withdrawn, Mukherjee says in Lok Sabha.
• No excise duty on purchase of jewellery valued Rs 5 lakh against earlier threshold of Rs 2 lakh, Mukherjee.
• Finance Minister announces withdrawal of TDS on immovable property as proposed in Budget.
• Retrospective amendments to Income-tax Act not to override DTAAs with 82 countries, says Mukherjee.
• Govt halves capital gains tax on private equity to 10 per cent.
• FM announces withdrawal of provisions in Customs and Excise rules under which bail was denied till public prosecutor was heard.

More details awaited