Indeed, the finance secretary even met the principal secretary on the 28th, presumably to discuss issues like coordination between the PMO and the finance ministry. Yet, in an unusual display of working overtime on critical issues, the finance ministry issued draft GAAR guidelines, replete with examples on where GAAR would apply and where it would not at 10:39pm. Presumably, you feel, the PMO authorised this, after all these were draft guidelines meant to get reactions of the concerned public before they were finalised. Less than 12 hours later, at 10:01am on the 29th, however, the press information bureau puts out a press release from the PMO which says these 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. So wasnt the Prime Minister shown the draft guidelines before Considering the new reforms thrust depends on perfect coordination between the PMO and the finance ministry, with the PMEAC and the Planning Commission thrown in as well, this is bad news.
When you read the draft guidelines, it suggests the PMO may not have been fully aware of what was being done. On the critical issue of whether FIIs were to be taxed or notthis was one of the reasons why the budget announcements on GAAR were put in abeyancethe guidelines are quite clear: where a Foreign Institutional Investor (FII) chooses not to take any benefit under (the Mauritius DTAA for instance) then, the provisions shall not apply Where an FII chooses to take a treaty benefit, GAAR provisions may be invoked in the case of the FII. (For some reason, the provisions are not to be invoked in case of Participatory Note (PN) investmentsthat is, while the FII will pay tax, there will be no inquiry by the taxman of the PN holder.) Getting a guideline to say GAAR will override the Mauritius treaty is curious, and given Indias precarious balance of payments situation, possibly the last thing we need.