The hot money seems in all moods to make a beeline for the India equities with today’s guidelines from the government on controversial GAAR taxes.

With Pranab-da rising to the occasion as UPA-nominated Presidential candidate, Prime Minister seems to have wasted no time in coming clean on the tax guidelines, which had prompted extreme pessimism among the foreign funds inflow, on India’s back-stepping policy and retrospective tax laws.

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India published draft guidelines to negate skepticism from the General Anti-Avoidance Rules (GAAR), to be implemented from FY13. The blue print has sought to address some of the concerns by suggesting to push GAAR only in cases where foreign investors have opted to take the benefit of tax avoidance treaties.

Furthermore, in a bid to provide relief to small taxpayers, the government has recommended to install a monetary threshold for invoking GAAR provisions, running into few lakhs rupees. However,  the draft guidelines points out that FIIs be taxed, but GAAR would not be invoked if an FII is not taking any treaty benefit.

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It is said that the government, under the leadership of the then FM Pranab Mukherjee, had to push for the controversial retrospective tax arrangement to tackle Vodafone’s alleged structuring of the deal to buy-out the Indian assets of Hutchison Whampoa, to avoid paying taxes to Indian exchequer.

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