New Delhi, Jul 30: Prime Minister Manmohan Singh today expanded the terms of reference of the GAAR committee by referring the issues relating to taxation of FIIs and portfolio investors to it with a view to provide greater clarity to them.
“It is necessary to have clarity on the tax liability of portfolio investors and Foreign Institutional Investors (FIIs) as a result of this amendment (relating to GAAR), particularly, when the investment is made through a registered stock exchange in accordance with SEBI guidelines and purely in the form of portfolio investment,” the PMO said in a statement.
Any clarification needs to be harmonised with the General Anti-Avoidance Rules (GAAR) guidelines and will have to address any residual concerns outside of GAAR, it said while making additional reference to the Committee.
Earlier this month, the Prime Minister had set-up a panel headed by ICRIER chief and taxation expert Parthasarathi Shome to bring “greater clarity” and prepare a roadmap for GAAR by September 30 for its implementation.
The statement further said there is an additional issue relating to the taxation of portfolio investment, particularly in the context of the amendment made to the Income Tax Act relating to the taxation of non-resident transfer of assets where the underlying asset is in India.
Therefore, “the Prime Minister has decided to refer the issue of the implications of this amendment on FIIs and portfolio investors to the Expert Committee on GAAR”.
The Prime Minister appointed committee on GAAR has already started consultations with the stakeholders to fine tune and bring greater clarity in the draft GAAR norms, which was prepared by the Finance Ministry.
Later, the Prime Minister, who now holds the finance portfolio, set up an expert committee under Shome to hold fresh consultations on the controversial tax issue.
Introduction of GAAR, which was proposed by then Finance Minister Pranab Mukherjee in the Budget FOR 2012-13 to check tax evasion, had triggered strong opposition from foreign investors following which its implementation was postponed till April next year.