Don't use GAAR to raise revenue: Shome

Anti-tax avoidance measures like GAAR should be used sparingly and not to raise revenue for the government, said Parthasarathi Shome who heads the government committees on taxation matters.

"We saw GAAR as a very very special instrument for controlling tax avoidance ... We have to protect our revenue but with these kind of anti-avoidance methods we cannot be expanding our revenues," Shome said at Merchant Chamber of Commerce & Industry event.

The expert committee on General Anti Avoidance Rules (GAAR) has recommended postponement of the controversial tax provision by three years to April 2016 and abolition of capital gains tax on transfer of securities.

As a step towards reassuring global investors, the Committee in its draft report, suggested that GAAR provisions should not be invoked to examine the genuineness of the residency of entities in Mauritius.

"GAAR should ensure the application is also very deft and clever so that we can go after cases where we know that there is high chance of winning," Shome said.

The Committee has also submitted its final report to Finance Minister P Chidambaram after taking into account stakeholders' comments.

"Our's was formed as a technical committee. We did not look at the case of this company, that company, etc ... These are methods to control the most integrous methods of avoidance of tax," Shome said.

In view of wide-spread concerns by foreign investors, the government had earlier postponed by one year implementation of GAAR which was introduced in the Budget for 2012-13 to check tax evasion.

Earlier, Central Board of Direct Taxes (CBDT) had come out with draft guidelines on GAAR which did not find favour with Prime Minister Manmohan Singh, who was then looking after the Finance portfolio. He had announced setting up of Shome panel to come up with fresh report after talking to stake holders.