The row over Bt Brinjal, a genetically modified version of the plant, provoked the government into imposing a moratorium on the commercial cultivation of the plant in India. The debate has revolved around issues of economic efficacy, human health, consumer choice and farmers’ rights. Jairam Ramesh, the Minister of State for Environment and Forests, made public his views on the subject, a gist of which is given below:
In order to understand the process followed by GEAC before giving the green signal to Bt Brinjal, we have made a timeline in which the plant was approved and the bodies involved in the process.
2000-2005 | Scientific tests carried out by Mahyco on Bt Brinjal |
2006 | Mahyco submits bio-safety data to GEAC (regulatory body under the Ministry of Environment and Forests). Seeks permission for large scale trials. |
Supreme Court stops ongoing field trials of GM crops due to a PIL filed by civil society representatives. | |
2007 | The expert committee 1 set up by GEAC, submits its report. Recommends seven more studies on bio-safety be repeated for reconfirmation of data generated during confined multi-location trials but approves large scale trials. |
Supreme Court lifts ban on GM crop field trials subject to conditions such as isolation distance etc. | |
As per GEAC direction, Indian Institute of Vegetable Research (IIVR) takes up the responsibility of large scale trails of Mahyco's Bt Brinjal trials at 10 research institutions across the country in 2007 and 11 in 2008. | |
2009 | Jan: IIVR submits the results of the large scale trails. Due to concerns raised by several stakeholders, GEAC constitutes another expert committee to look into adequacy of biosafety data generated as well as the concerns raised by all stakeholders. |
Oct 8: Expert-committee 2 submits its report. States benefits of Bt Brinjal far outweigh the perceived and projected risks. | |
Oct 14: GEAC approves the environmental release of Bt Brinjal containing the event EE1 (with one dissent note from P.M. Bhargava). | |
Oct 15: Jairam Ramesh announces a nationwide consultation in January and February of 2010 pending a final decision on this issue. | |
2010 | Jan 13 to Feb 6: Public meetings were organized on the Bt Brinjal issue. The summary of the consultations is available on the Ministry’s website. |
Many states announce ban on commercial cultivation of Bt Brinjal including Uttarakhand, Himachal Pradesh and Karnataka. | |
Feb 9: Jairam Ramesh decides to halt the commercialization of Bt Brinjal. |
The issue of the General Anti Avoidance Rule (GAAR) has dominated the news recently and there are fears that GAAR will discourage foreign investment in India. However, tax avoidance can hinder public finance objectives and it is in this context GAAR was introduced in this year’s Budget. Last week, the Finance Minister pushed back the implementation of GAAR by a year. What is GAAR? GAAR was first introduced in the Direct Taxes Code Bill 2010. The original proposal gave the Commissioner of Income Tax the authority to declare any arrangement or transaction by a taxpayer as ‘impermissible’ if he believed the main purpose of the arrangement was to obtain a tax benefit. The 2012-13 Finance Bill (Bill), that was passed by Parliament yesterday, defines ‘impermissible avoidance arrangements’ as an arrangement that satisfies one of four tests. Under these tests, an agreement would be an ‘impermissible avoidance arrangement’ if it (i) creates rights and obligations not normally created between parties dealing at arm’s length, (ii) results in misuse or abuse of provisions of tax laws, (iii) is carried out in a way not normally employed for bona fide purpose or (iv) lacks commercial substance. As per the Bill, arrangements which lack commercial substance could involve round trip financing, an accommodating party and elements that have the effect of offsetting or cancelling each other. A transaction that disguises the value, location, source, ownership or control of funds would also be deemed to lack commercial substance. The Bill as introduced also presumed that obtaining a tax benefit was the main purpose of an arrangement unless the taxpayer could prove otherwise. Why? GAAR was introduced to address tax avoidance and ensure that those in different tax brackets are taxed the correct amount. In many instances of tax avoidance, arrangements may take place with the sole intention of gaining a tax advantage while complying with the law. This is when the doctrine of ‘substance over form’ may apply. ‘Substance over form’ is where real intention of parties and the purpose of an arrangement is taken into account rather than just the nomenclature of the arrangement. Many countries, like Canada and South Africa, have codified the doctrine of ‘substance over form’ through a GAAR – type ruling. Issues with GAAR A common criticism of GAAR is that it provides discretion and authority to the tax administration which can be misused. The Standing Committee responded to GAAR in their report on the Direct Taxes Code Bill in March, 2012. They suggested that the provisions should ensure that taxpayers entering genuinely valid arrangements are not harassed. They recommended that the onus should be on tax authorities, not the taxpayer, to prove tax avoidance. In addition, the committee suggested an independent body to act as the approving panel to ensure impartiality. They also recommended that the assessing officer be designated in the code to reduce harassment and unwarranted litigation. GAAR Amendments On May 8, 2012 the Finance Minister amended the GAAR provisions following the Standing Committee’s recommendations. The main change was to delay the implementation of GAAR by a year to “provide more time to both taxpayers and the tax administration to address all related issues”. GAAR will now apply on income earned in 2013-14 and thereafter. In addition, the Finance Minister removed the burden upon the taxpayer to prove that the main purpose of an alleged impermissible arrangement was not to obtain tax benefit. These amendments were approved with the passing of the Bill. In his speech, the Finance Minister stated that a Committee had also been formed under the Chairmanship of the Director General of Income Tax. The Committee will suggest rules, guidelines and safeguards for implementation of GAAR. The Committee is expected to submit its recommendations by May 31, 2012 after holding discussions with various stakeholders in the debate.