Within a fortnight of the Finance Ministry issuing draft guidelines on GAAR, Prime Minister Manmohan Singh on Friday set up a committee to prepare fresh norms on the controversial tax provision to bring “greater clarity” and prepare a roadmap by September 30 for its implementation.

The four-member committee, to be headed by ICRIER chief and taxation expert Parthasarathi Shome, will submit its report after consulting and taking feedback from stakeholders.

“The Prime Minister has approved the constitution of an Expert Committee on GAAR to undertake stakeholder consultations and finalise the guidelines for GAAR (General Anti-Avoidance Rules),” a PMO statement said.

“This committee would manage the consultation process and finalise the draft GAAR Guidelines,” it said.

The setting up of the committee to hold wider consulations on the controversial tax provision comes within a fortnight of the Finance Ministry issuing draft guidelines. However, the Prime Minister, who holds the Finance portfolio, was quick to distance himself from it, saying that he had not approved these.

Introduction of GAAR, which was proposed by then Finance Minister Pranab Mukherjee in the Budget 2012-13 to check tax evasion, had triggered outrage by foreign investors following which its implementation was postponed till April next year.

“There is a need to have greater clarity on many other fronts. With this in view, the Prime Minister has constituted this Expert Committee which will bring transparency and a high degree of technical expertise to the consultation process,” the PMO statement said.

“While postponing GAAR by one year to 2013 was a very welcome move, a widespread consultative process is necessary to generate a discussion on GAAR provisions so that there is an informed debate on how GAAR is going to operate,” is said.

The committee will have N. Rangachary, former Chairman of Insurance Regulatory and Development Authority, Ajay Shah, Professor at economic think-tank NIPFP and Sunil Gupta, Joint Secretary, Revenue Department, as members.

The Committee’s Terms of Reference include receiving comments from stakeholders and general public on the draft guidelines already published by the government on its website.

The committee will also “vet and rework” the guidelines based on this feedback and publish the second draft for comments and consultations by August 31, the statement said.

The Terms of Reference will also include undertaking widespread consultations on the second draft GAAR guidelines and finalising these and a roadmap for implementation.

The report will be submitted to the government.

A schedule has been laid for the committee which includes receiving comments from stakeholders and general public till July-end. The guidelines are to be finalised, a roadmap for implementation prepared and submitted to the government by September 30.

Referring to previous steps taken on GAAR, the statement said the Revenue Department undertook some consultations with stakeholders before finalising the first draft set of guidelines. These consultations were done by invitation.

“Subsequently, at PM’s behest, D/o Revenue put the draft guidelines on the web. This was widely welcomed as it lifted the veil on the GAAR Guidelines,” it said.

This assumes significance as the PMO had issued a statement on June 30, within 12 hours of the first draft guidelines being put on the website, saying that Singh, holding the Finance portfolio, had not approved those.

“These (draft guidelines) have not been seen by the Prime Minister and will be finalised with the approval of the Prime Minister, who holds the Finance portfolio, only after considering the feedback received,” a PMO release had said.

In today’s statement, the PMO said, “while these steps are good in themselves, a need was felt for far more widespread consultations.”