Young, believes the decision to defer the implementation by a year is a good move as it would provide some time so that it can be made applicable in a disciplined manner.
"It would have been unfair to completely do away with Gaar when other countries also have these rules. The decision to shift the onus from taxpayer back to tax authority, to prove that transaction has been done to avoid tax and by including independent people in the panel to ascertain the Gaar applicability, would provide relief to foreign investors," he said.
Foreign institutional investors (FIIs) were quite worried on the new taxation rules ever since the same were proposed in the budget. They were net sellers of Indian equities worth `568.40 crore in the month of April after pumping in `44,037 crore in the first three months of this calendar year.
"The fact that lack of clarity on Gaar has been a big drag on markets for the last six weeks or so deferring Gaar implementation is unquestionably positive for liquidity and markets in the short term. Also, it sends out positive signs to FIIs that the government listens to corporates and investors," said Saurabh Mukherjea, head of institutional equities at Ambit Capital.
Despite the news of Gaar deferment, FIIs net sold shares worth `630 crore on Monday, as per provisional exchange data.
Experts believe that Gaar relief would be short-lived as markets have too many things to worry about right now.
Prakash Diwan, head-institutional clients group at Asit C Mehta Investment Intermediates, sees Nifty testing 4875-4900 levels on global worries.
"The FIIs can't take only a year's perspective on Indian markets and they would be eventually subjected to Gaar from next fiscal. Also there are too many headwinds currently right from the European problem to currency concerns, government inaction and fiscal deficit worries domestically. Also, outlook on domestic industrial growth has not changed despite rate cuts. Unless these get sorted out, markets may continue to remain under pressure" said Diwan.
Mukherjea too believes that the Gaar deferment along with fall in crude prices would provide support to markets only momentarily.
"Over the 6-12 months period, market direction would be ultimately determined by the macro environment and economic factors. The European Union is likely to go through its usual cycle of pain, stumbling from one crisis to another. Considering these, India may not see huge upside as the global risk appetite is low currently," he said.