Foreign investors push Indian government to curb judicial anti-avoidance tax rule
Multinational investors and private-equity firms are urging the Indian government to intervene against the judicial anti-avoidance rule (JAAR) used to deny tax benefits on grandfathered shares.
Foreign investors operating in India, ranging from large multinationals to private-equity and venture-capital funds, have appealed for government action to halt the use of the judicial anti-avoidance rule (JAAR) by tax authorities. JAAR was invoked to refuse tax benefits claimed by at least three Mauritius investors on the sale of shares acquired before April 1 2017, known as grandfathered shares. The industry association ASIFMA is positioning itself as the collective voice in talks with regulators and the central board of direct taxes (CBDT), warning that a simple circular may encounter legal obstacles and that a formal amendment may be needed.
Tax practitioners contend that extending protection for these shares via an executive decision could contradict Supreme Court rulings and the broader intent of India's tax framework. The General Anti-Avoidance Rules (GAAR), which apply when benefits exceed ₹3 crore, are codified, whereas JAAR stems from case law, adding to the complexity of the dispute.
Why it matters
The outcome will affect how foreign investors are taxed in India and could influence future investment decisions.
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