The Hindu Business Line : Anomalies in fringe benefit tax will be removed: Govt

The Union Finance Minister, Mr P. Chidambaram, addressing a National Conference on Union Budget at the Federation of Indian Chambers of Commerce & Industry in New Delhi on Wednesday. Also seen are (from right) the Chairman, Taxation Committee, FICCI, Mr Pradeep Dinodia; the FICCI President, Mr Onkar Singh Kanwar; and the Senior Vice-President, Mr Saroj Kumar Poddar. - Anu Pushkarna

New Delhi , March 2

THE Finance Minister, Mr P. Chidambaram, today assured that the Government had no intention to levy the proposed Fringe Benefit Tax (FBT) for any legitimate business expenses such as business communication, knowledge enhancement, and sales marketing.

While addressing the trade and industry at the Federation of Indian Chambers of Commerce and Industry , the Finance Minister said any anomalies on the 2005-06 Budget proposal pertaining to the FBT would be addressed.

"There is no intention to tax legitimate business expenditure. I have asked my people to look at the entries to see if any unintended anomaly has crept in that needs to be addressed," Mr Chidambaram emphasised.

"We must wait for the final shape of the Finance Bill to emerge. All the unintended anomalies that may have crept in while drafting the provisions in the Budget will be removed. The final draft will reflect these changes when the rules will be framed," he said.

Trade and industry has been expressing apprehensions on the introduction of the Fringe Benefit Tax, especially inclusion of sales promotion and publicity into this net.

Cash withdrawals

On the proposal to impose tax on withdrawals from banks, Mr Chidambaram indicated that 0.1 per cent tax on cash withdrawals could be reconsidered either by raising the limit or looking at `alternative' methods of tracking withdrawals and black money generation. He admitted that there was opposition from the Congress and UPA partners to the proposal.

Defending the proposal, he stated, "We are concerned about huge withdrawals of cash from banks every day. Such transactions, which distort economic level playing field, will have to be addressed. If it cannot be addressed this way, it will have to be addressed in another way." The Finance Minister said the latest Budget proposal has attempted a major overhaul of the country's tax system, by reducing corporate tax and import duties, smoothing out irregularities in excise duties, and promoting a plan to have a uniform tax structure across the States. However, the Government will leave the current corporate tax structure and depreciation rates undisturbed for the remainder of its tenure, he said.

Imports and VAT

The Finance Minister kept the doors open for introduction of a VAT regime in imports. This, however, he said would be done in consultation with industry.

He also said that excise duties must come along the Cenvat rate, which at present was 16 per cent. Mr Chidambaram, however, said this rate could be revisited in years to come. The Finance Minister said he was in favour of reducing stamp duty to 3-4 per cent and asked industry representatives to use their persuasive skills with the Chief Ministers, as this was in the domain of the states.

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