Rollbacks

The government on Monday deferred the implementation of the controversial General Anti-Avoidance Rules (GAAR), aimed at checking tax evasion, by one year and included some safeguards in a move that was aimed at pacifying angry investors and reviving the investment climate. The proposed changes in some tax rules in the 2012-13 budget had drawn criticism from foreign investors and governments.  The changes had rattled financial markets and forced some hedge funds to pull out. If foreign investors forced finance minister Pranab Mukherjee’s hand in reworking General Anti-Avoidance Rules (GAAR), protests from jewellers and the real estate sector made him drop provisions that had not gone down well with these two segments. Mukherjee, however, did not drop the proposal to tax merger and acquisition (M&A) deals such as Vodafone’s acquisition of 67% stake from Hutch in the Indian telecom venture. Mukherjee indicated that he will announce some duty changes before the Finance Bill is put to vote in the Lok Sabha on Tuesday. The Finance minister also proposed some amendments to GAAR provisions by removing the onus of proof entirely from the taxpayer to the revenue department before any action can be initiated under GAAR. An independent member will be appointed in the GAAR approving panel to ensure objectivity and transparency and another member of the panel will be an officer of the level of joint secretary or above from the law ministry.  The finance minister also said that clarificatory amendments do not override the provisions of the Double Taxation Avoidance Agreement (DTAA) which India has with 82 countries. 
The FM also announced some other concessions on the direct taxes front. He plans to reduce the long term capital gains tax on private equity and other investors from 20% to 10% on the same lines as applicable to foreign institutional investors (FIIs). 
Further, Mukherjee withdrew the provision for levy of TDS on transfer of immovable property. The Finance Bill had proposed that property buyers deduct 1% of the transaction value at the time of transfer. He also raised the threshold limit for tax at source on cash purchases of jewellery to Rs 5 lakh from the present Rs 2 lakh.  To curb the flow of unaccounted money in the bullion and jewellery trade, the Finance Bill had proposed collection of tax at source by the seller at the rate of 1% of the sale amount from the buyer for all cash transactions. The jewellery industry had protested the move and had gone on strike. Mukherjee also withdrew the 1% excise duty levied on unbranded jewellery. 
Tax exemption on long term capital gains to unlisted securities for companies going for IPO . This move and proposed STT of 0.2% to encourage listing 
Lower rate of withholding tax of 5% on foreign borrowings extended to all sectors  Will boost forex inflows when rupee is under pressure 
Drops amendments to Customs and Central Excise Act relating to bail and cognisable offences. No over-riding powers to tax authorities, relief for business from possible harassment