Gaar

General Anti-Avoidance Rules

India and International perspective

www.deloitte.com/in

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Contents

Executive summary

4

Pre GAAR concept

6

Pre GAAR concept – India experience

8

GAAR concept

10

International experience

11

India Regime

17

Way forward

23

General Anti-Avoidance Rules India and International perspective

3

Executive summary

“Tax avoidance like tax evasion, seriously

undermines the achievements of the public

finance objective of collecting revenues in an

efficient, equitable and effective manner1.”

Internationally, tax avoidance has been recognized as an

area of concern and several countries have expressed

concern over tax evasion and avoidance. This is also

evident from the fact that either nations are legislating

the doctrine of General Anti-Avoidance Regulations in

their tax code or strengthening their existing code.

provision may undermine the common denominator

in determination of a tax avoidance scheme, i.e., the

principle that though the taxpayer is free to choose the

most tax efficient method, the commercial justification

for the choice taken and tax consideration (benefit) is

not the only reason.

In India, the proposed Direct Tax Code 2010 (DTC

2010 or Code) seeks to address the issues relating

to tax avoidance and evasion by bringing in General

Anti-Avoidance Rules (GAAR) in addition to various

transaction-specific Special Anti-Avoidance provisions.

Considering the goals of tax avoidance legislation,

namely, deferral, re-characterization, elimination and

shifting, India would need to address the issue in the

proper perspective so that the provisions and their

implementation do not become a law onto themselves.

In the circumstances, one should be aware of some

issues relating to the promulgation of a General AntiAvoidance Rule, in terms of it being receptive to:

The Discussion paper issued along with the proposed

new tax code states that tax...