SPECIFIC ANTI AVOIDANCE RULE (SAAR),GENERAL ANTI AVOIDANCE RULE (GAAR),

 

To deal with the issues of Tax evasion by MNC's, various methodologies were adopted by Governments across the world .Various anti avoidance rules were implemented by  the Government of India to check the Tax avoidance. Specific Anti Avoidance Rule (SAAR), General Anti Avoidance Rule (GAAR), Arm Length Pricing, Advance Pricing Agreement and Safe Harbor were such prominent methodologies  to deal with Tax Avoidance.

SPECIFIC ANTI AVOIDANCE RULE (SAAR):

• Anti avoidance rules are basically divided into two categories—General and specific.
• Specific Anti Avoidance Rule (SAAR) was operational before General Anti Avoidance Rule  (GAAR).
• General Anti Avoidance Rule (GAAR) refers to legislation dealing with “general” rules, while Specific Anti Avoidance Rule (SAAR) refers to legislation dealing “specific” avoidance. 
• The prevailing law deals with instances of specific tax abuse and the general tax avoidance is addressed by judicial doctrine.
• Specific Anti Avoidance Rule (SAAR ) provides for a set of rules which target specific ‘known’ arrangements of tax avoidance. 
• They specifically lay down the conditions where they may be invoked.

GENERAL ANTI AVOIDANCE RULE (GAAR):

• General Anti Avoidance Rule (GAAR) is an umbrella tool for checking aggressive tax planning especially those business transactions which are entered into with the objective of avoiding tax. 
• The General Anti Avoidance Rule  (GAAR) itself is an unconventional type of tax legislation; bringing tax avoidance under the scrutiny of tax officials.
•  It has been introduced in India due to VODAFONE case ruling by the Supreme Court. 
• General Anti Avoidance Rule  (GAAR) has been implemented from 1^st of April 2017 on the recommendation of Shome committee.

ISSUES WITH GENERAL ANTI AVOIDANCE RULE (GAAR):

• The concern is about the arbitrary usage of the powers that the officers might have under General Anti Avoidance Rule  (GAAR) 
• The line of difference between an objectionable and a permissible avoidance is very thin.
•  There is also another fear that tax officers can harass people using this law.