Prime Minister Manmohan Singh set up an Expert Panel to review the GAAR

Prime Minister of India Manmohan Singh constituted an expert panel to review the controversial General anti-Tax Avoidance Rule (GAAR) and come up with a roadmap for the effective implementation of the law.

ICRIER chief and taxation expert Parthasarathi Shome has been appointed the head of the four-member panel which will submit its report by 30 September 2012 after having consultation with various stakeholders. N Rangachary, former Chairman of Insurance Regulatory and Development Authority, Ajay Shah, Professor at economic think-tank NIPFP and Sunil Gupta, Joint Secretary, Revenue Department, will be the other three members in the panel.

The Prime Minister’s move to set up the panel came within a fortnight of the Finance Ministry issuing draft guidelines. The Union Government in the general budget 2012-13 had announced to introduce the GAAR, with the objective to prevent tax evasion. The legislation, however, drew fierce criticism of foreign investors and business houses in the country because of its stringent provisions.

The furor among the investors regarding the stern GAAR provisions forced the government to defer its implementation until March 2013. The GAAR guidelines were intended to shut investment routes such as Mauritius route. The rule which was broadly against the term of India-Maurititus Direct Tax Avoidance Agreement raised the suspicion among the foreign investors about India's future as a safe investment destination. The repurcussions of the proposed law reflected in the foreign investment in the country, which dropped sharply over the past few months.