IAS/PCS- Economics-The Parthasarathy Shome Committee

 

The Parthasarathy Shome panel was formed by Prime Minister of India in 2012.

 

The committee was related to General Anti-Avoidance Rule (GAAR) .

 

GAAR is an anti-tax avoidance law under Chapter X-A of the Income Tax Act, 1961 of India.

 

The committee was concerned with the bringing the clarity on the taxation and the concerns of the foreign investors and all non-resident tax payers.

 

The panel has advocated postponement of the controversial tax provision by three years till 2016-17.

 

The panel recommended the abolition of capital gains tax on transfer of securities.

 

The panel provided exemption to the residents of the Mauritius from these rules.

 

The recommendations the committee included :

 

• The deferment of the implementation of the GAAR for three years.

 

• GAAR should be made applicable only if the monetary threshold of tax benefit is Rs.3 crore and more with changes in Income Tax Rules 1962.

 

• GAAR should not be invoked to examine the genuineness of the residency FII from Mauritius and the government should retain the provisions of the CBDT circular issued in the Year 2000 on acceptance of Tax Residence Certificate (TRC) issued by Mauritius.

 

• GAAR should apply “only in cases of abusive, contrived and artificial arrangements”.

 

• The Shome Committee has proposed to do away with short-term capital gains tax by increasing the Securities Transaction Tax.

 

• The Approving Panel (AP) for purposes of invoking GAAR provisions should consist of five members, including Chairman, who should be a retired judge of the High Court. Besides, two members should be from outside government and persons of eminence drawn from the fields of accountancy, economics or business, with knowledge of matters of income- tax, and two members should be chief commissioners of income-tax or one Chief Commissioner and one Commissioner. It also suggested that GAAR can be invoked only with the approval of the Commissioner.

 

• To merge the Central Board of Direct Taxes (CBDT) and Central Board of Indirect Taxes and Customs (CBIC).

 

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