𝐆𝐀𝐀𝐑 𝐚𝐧𝐝 𝐭𝐡𝐞 𝐏𝐏𝐓: 𝐂𝐨𝐧𝐯𝐞𝐫𝐠𝐞𝐧𝐜𝐞, 𝐂𝐨𝐧𝐟𝐥𝐢𝐜𝐭 𝐚𝐧𝐝 𝐭𝐡𝐞 𝐅𝐮𝐭𝐮𝐫𝐞 𝐨𝐟 𝐈𝐧𝐝𝐢𝐚’𝐬 𝐀𝐧𝐭𝐢-𝐀𝐯𝐨𝐢𝐝𝐚𝐧𝐜𝐞 𝐅𝐫𝐚𝐦𝐞𝐰𝐨𝐫𝐤

If GAAR and the Principal Purpose Test (PPT) are expected to operate concurrently in relation to the same cross-border
arrangement, their application ought to be guided by a coherent and harmonized framework, beginning with procedural safeguards. As a matter of statutory design, GAAR incorporates significantly stronger procedural protections than the PPT. These safeguards should not merely exist on paper but must be faithfully adhered to in practice. More importantly, similar procedural discipline should be incorporated into the application of the PPT to ensure consistency, fairness, and legal certainty.

On the substantive threshold, there is a fair argument that a transaction failing the PPT will, as a rule, also fall foul of GAAR — given that the PPT casts the wider “one of the principal purposes” net compared with GAAR’s tighter “main purpose” standard. Aligning the two along these lines would also honour the OECD’s own commitment to harmonising anti-abuse rules across domestic law and tax treaties. For now, that is the direction of travel worth arguing for.