Tuesday, 18 September 2012

India : Slump in FDI flows forces volte-face on rules / GAAR

Foreign investors now have a window of opportunity over the next two years to pour money into projects they wish to establish in India using the same elaborate cross-border corporate structures, investment trails and other stratagems they have employed since 1991 to avoid having to pay huge taxes on repatriation of profits, and the payment of royalties and dividends.

It has taken just one fortnight for the pieces of the UPA government’s carefully-crafted strategy to fall into place as it tries hard to reassure foreign investors that they will continue to have an easy ride into India — as long as it is in power.

On September 1, the Parthasarathi Shome committee recommended that the dreaded General Anti-Avoidance Rule (GAAR) should be kept in abeyance for the next three years. The government had earlier planned to kick off GAAR from April 1 next year. But at a time when it wants to soothe foreign investors’ fears, it will readily accept the Shome committee’s recommendations — and that means that the next government, formed after the general elections in 2014, will have to grapple with the intricacies of the contentious tax rule.

Source: http://www.telegraphindia.com/1120917/jsp/business/story_15985117.jsp#.UFgnXY3iaPQ


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