The Finance Act, 2012 (FA 2012) contains a number of far-reaching proposals to amend the Indian Tax Laws (ITL), including a proposal to fast-forward General Anti-avoidance Rules (GAAR) from the Direct Taxes Code Bill, 2010 (DTC) through which there was a proposal to introduce GAAR.

In deference to various representations, the application of GAAR provisions has been deferred to 1 April 2013. One of the main reasons for deferral, as clarified by the Finance Minister, was to provide more time to taxpayers and the tax administration to address all related issues.

GAAR provisions are directed to be applied in accordance with the Guidelines and would be subject to the conditions and the manner, as may be prescribed. During the DTC regime itself, in February 2012, the Central Board of Direct Taxes (CBDT) constituted a Committee with the following reference terms: (i) To provide recommendations for formulating guidelines to implement the provisions. (ii) To draft a Circular so as to ensure that GAAR is not applied indiscriminately.

The Committee has, after due examination, provided its comments on various facets of GAAR provisions as introduced by FA 2012. The GAAR Committee Report (Report), as submitted to the CBDT, contains recommendations, to be eventually split between the Guidelines and the Circular, on the scope of applicability of GAAR and the procedure of its implementation. It also seeks to explain the scope of certain terms with the help of illustrations.

The recommendations are not binding on the CBDT. As per a clarification issued by the Prime Ministers Office (PMO), the recommendations are open for consultation and feedback from stakeholders.