"The basic issue with GAAR provisions is the trust deficit between the corporate entities and government."Discuss in the light of recent developments.
General Anti-Avoidance Rules (GAAR) are general rules that target any transaction of business arrangement that is done for aggressive tax planning, tax avoidance or tax evasion. The objective of GAAR is to check tax avoidance by giving additional powers to the Income Tax Department. The department will have powers to deny tax benefit if a transaction was carried out exclusively for the purpose of avoiding tax. It will be able to go deeper into ownership structures, beneficial ownerships, voting rights, transactions, etc. and lift the corporate veil if there is any artificial arrangement made just for the sake of avoiding taxation. As per the proposals, GAAR can be invoked only if artificial arrangements have been done to avoid tax value of at least Rs. 3 Crore in a particular assessment year. But, the industries in one voice raised several concerns over the matter. The real fear was that overarching powers to the Income Tax department would create an environment of deterrence and would make doing business further difficult in India. Thus; we see that the basic issue here lies in the trust deficit between the investors / corporate and the income tax department. As per current Status GAARC has been not implemented in India. (196 words)