Arshu John and Linesh Lalwani write a detailed analysis of the General Anti-Avoidance Rule from an Indian as well as International perspective.
Abstract
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. In India, the proposed Direct Tax Code seeks to address the issues relating to tax avoidance and evasion by bringing in General Anti-Avoidance Rules (GAAR). This paper firstly lays down the essential features of the proposed GAAR provisions. It gives a brief history as to the introduction of GAAR in India which is necessary because the introduction of such a provision is an important step for a fast-growing economy of a developing country such as India. Recently, the implementation of GAAR was deferred yet again which only points to the magnitude of the implications of such a step. It is the opinion of the authors that despite such deferment, the issue of GAAR is nonetheless very relevant, and one that deserves discussion. The paper has for this reason covered the entire debate that surrounds the implementation of GAAR. The potential concerns that arise from it, the advantages that would be borne from it, and the alternatives to GAAR which could allow the exploitation of such advantages without the risk of these concerns. The paper also compares the proposed GAAR of the Direct Tax Code with provisions of GAAR established in five other countries, namely, United Kingdom, United States of America, South Africa, Canada and Australia and how these GAAR provisions have shaped and influences the Indian GAAR provisions. Lastly, the paper also explores the effect it will have on international law and treaty obligations. In conclusion, the authors submit that GAAR presents itself as the necessary solution to check tax evasion and tax avoidance.