Press Information Bureau

Government of India

Ministry of Finance

09-October, 2012 19:01 IST

 Vide notification dated July 17, 2012, an Expert Committee was constituted on General Anti Avoidance Rules (GAAR) to undertake stakeholder consultations and finalize the guidelines.

 Subsequently vide notification dated September 1,2012 the Government modified the Terms of Reference of the Committee to include an additional item “to examine the applicability of the amendment on taxation of non-resident transfer of assets where the underlying asset is in India, in the context of all non-resident taxpayers”.

 The Committee has submitted its draft report on indirect transfer, which reflects consultations and written representations from a number of stakeholders including tax advisory firms comprising accountants and lawyers, chambers of commerce and industry, foreign investor associations and individual industry representatives.

 The views expressed in Report of the Committee are that of an independent Committee and it should not be construed in any manner whatsoever as the views of the Government.

 The report of the Committee has been uploaded on the Finance Ministry website (www.finmin.nic.in) and Income-tax Department website (www.incometaxindia.gov.in) for comments from stakeholders and the general public.

 The comments and suggestions on the draft report may be submitted by 19th October, 2012 at the email address ([email protected]) or by post at the following address with “comments on Expert Committee Report on Retrospective Amendments” written on the envelope.

Joint Secretary (Tax Policy & Legislation-II)

Central Board of Direct Taxes,

Department of Revenue,

Room No.147-C, 1st Floor,

North Block, New Delhi-110001

The views of the Government on the recommendations of the Expert Committee will be formed after receipt of their final Report.

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DSM/RS/Kv

Taxation of indirect transfer of foreign shares: Committee recommends prospective application and investor protections. The Committee recommends that the Finance Act, 2012 amendments on indirect transfers be applied prospectively because they widen the tax base; it prescribes clarified definitions (ownership/control based 'share or interest', 'substantially' >50% of global assets, 'look through' for 'directly or indirectly', FMV net asset valuation at last balance sheet with adjustments), proportional taxation of gains attributable to Indian assets, exemptions for small shareholders (<26%), frequently traded listed companies, intra group restructurings, protections for FII and PE investors, exclusion of dividends from deemed India source, and safeguards against retrospective interest and penalties if retrospective demands are raised.