Economic Affairs Secretary R Gopalan has said that the specific details relating to the General Anti-Avoidance Rule (GAAR) will be notified on May 7-8 following the passing of the Finance Bill in the union Parliament.

Gopalan backed GAAR by saying that that the Indian government is not the only one to implement such a system. He also stressed that the authorities are working to create an easy and transparent mechanism to implement GAAR.

“We are working on an easy and transparent mechanism to implement GAAR, but more specifics will be notified once the Finance Bill is passed,” he said.

India’s union Finance Minister Pranab Mukherjee had said that the proposed GAAR is not aimed at troubling honest taxpayers in the country and allow the authorities to check tax evaders. Gopalan reiterated these claims to calm FIIs, who appear concerned over the new regulation.

The FII inflow has fallen into the country since the proposal was announced as part of the union budget. FIIs net bought Rs 8000 crore of shares in March, compared to Rs 25,000 crore in February.

GAAR is not likely to hurt honest taxpayers in the country and the government will not punish genuine foreign investors who invest in domestic shares through participatory notes. According to market analysts, the central government will soon start taxing the inflow of anonymous foreign funds in to the stock market. They expect the investments through participatory notes into the Indian stocks to slowdown if the government introduces the GAAR.

Foreign portfolio investors that are registered with the Indian market regulator issue p-notes. They can also be issued by their sub-accounts for foreign investors, who often invest in the scheme anonymously.

The p-notes often avoid paying taxes in India but the introduction of GAAR would impact the investments in the instruments due to introduction of taxes. Experts say that the proposal could result in shutting down the P-note to invest in India.