The government has deferred by 2 years the controversial General Anti Avoidance Rules (GAAR) which seek to authorize taxmen to clamp down on deals and income suspected to be structured to avoid paying taxes. The decision to postpone GAAR's implementation is based on the report of the Parthasarathi Shome Committee set up in July to evolve a roadmap on the tax avoidance proposals.
The GAAR provisions, put forth in the 2012-13 budget, had triggered protests from business leaders as it can potentially affect almost anybody and everybody. For example, many companies would have been forced to restructure employees’ salaries if the taxmen inferred that they were structured only to avoid taxes.
Foreign institutional investors also feared paying capital gains tax on investments in Indian markets. Predictably, the markets welcomed the move as the benchmark BSE Sensex jumped 243 points to close the day at a two-year high of 19,906.41, a rise of 1.23%.