GAAR draft rules caught in row: PM says not seen

The draft guidelines issued by the Finance Ministry on General Anti-Avoidance Rules (GAAR) today appeared to have got caught in a controversy with Prime Minister Manmohan Singh distancing himself by saying that he had not approved these.

Barely 12 hours after the guidelines were issued by the Finance Ministry, which is under Singh's direct charge now, the Prime Minister's Office (PMO) issued a statement this morning asserting that a final call on GAAR will be taken by the Prime Minister after proper feedback.

"These (draft guidelines) have not been seen by the Prime Minister and will be finalised with the approval of the Prime Minister, who holds the Finance portfolio, only after considering the feedback received," the PMO release said.

"The GAAR guidelines that have been put up on the government website from the official level of the Finance Ministry and shared with some stakeholders are only draft guidelines and have been put out for receiving wide-ranging feedback and for discussion purposes only," it said.

Its suo motu comment came after the Finance Ministry last night issued draft guidelines on GAAR - a budgetary proposal to check tax evasion - to seek feedback of the stake holders.

The draft guidelines seek to address the concerns of the investors over misuse of the tax proposal. Besides other things, it said that there would be a threshold limit for invocation of GAAR and it would apply on income accruing after April 1, 2013.

In view of the widespread protest against the proposal, former Finance Minister Pranab Mukherjee had postponed its implementation by a year to April 2013. The Finance Ministry has invited stakeholder comments on the draft rules till July 20, 2012.

When asked to react to the PMO statement, Finance Secretary R S Gujral tried to be dismissive, arguing, "Don't read too much into the release by the PMO."

Agreeing that the Prime Minister "has not applied his mind (on the draft GAAR guidelines)", Gujral said, "These are draft guidelines ... Obviously the final guidelines will be after consultation with the PMO... Suggestions from stakeholders will be taken in consideration and finally it has to be decided by the minister in charge."

In a related development, Chief Economic Advisor Kaushik Basu today insisted that there was no move to dilute any of the recent policy decisions, like on GAAR, after the Prime Minister took direct charge of the Finance Ministry.

"I don't think that any policy step (of recent months) has been diluted," he told reporters at a function here.

"The message we were giving actually for last couple of months, including during the time when Pranab Mukherjee was the Finance Minister, is the same message, that we want this industry to do well and we want to be as cooperative as possible," he added.