The least the two-year deferral of the general anti avoidance rules, or Gaar, will ensure is that the current account deficit, already at a lifetime high, doesn’t worsen further. The spectre of a downgrade of the sovereign rating is too real to miss.
To be sure, Gaar has been an overhang on the markets long enough. The announcement last year had spooked overseas investors, leading to much hue and cry.
The concerns were understandable. Sweeping as the provisions were, there were fears that they would be misused – the line between tax avoidance and tax mitigation was really thin, leaving a lot to interpretation by income-tax authorities. Trust an assessing officer to tell good money from bad? Oh, come on.
So when the Prime Minister decided set up a committee under Parthasarathi Shome to review the provisions – barely a month after the finance ministry released the draft guidelines – some had expected a watering down of the draconian provisions.
Turns out they were right – the government has accepted most of the committee’s recommendations.
And the Street is relieved.