General Anti-avoidance Rule (GAAR)
Recently, the Department of Revenue under the Ministry of Finance started investigations under the General Anti-avoidance Rule (GAAR) into firms misusing the law. Many firms have been using creative methods to avoid paying taxes to the government.
What is General Anti-avoidance Rule (GAAR)?
GAAR is an anti-tax avoidance law, whose provisions come under the Income Tax Act, of 1961. GAAR was first proposed in the Direct Tax Code 2009 and but the Direct Tax Code was not yet implemented in the country. GAAR was introduced in 2012 by the then Finance Minister during the Budget session. However, its implementation was delayed and it became applicable from the financial year 2018-19. The Vodafone case is one of the main reasons for the framework of GAAR.
What is the purpose of the General Anti-avoidance Rule (GAAR)?
GAAR aims to reduce losses to the government that occurs due to aggressive tax avoidance measures practiced by companies. GAAR enables the revenue department to deny tax benefits if a deal is found without any commercial purpose. Officials can deny double taxation avoidance benefits if deals made in tax havens were found to be avoiding taxes. GAAR is mainly against those deals and transactions whose only intention is to avoid tax.
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Month: Current Affairs - May, 2022
Category: Economy & Banking Current Affairs - 2024