The Hindu Business Line : FICCI urges relook at surcharge hike, fringe benefit tax

IN order to give the corporate India the much needed boost, the Federation of Indian Chambers of Commerce and Industry (FICCI) has urged for a re-look at the hike in surcharge on corporate tax, reduction in the depreciation rates, introduction of fringe benefit tax (FBT), widening of the scope of weighted benefit for promotion of R&D, abolition of dividend distribution tax and banking cash transaction tax and discontinuance of education cess.

In a letter to the Finance Minister, Mr P. Chidambaram, the FICCI President, Mr Onkar S. Kanwar, has spelt out the key problem areas that need to be addressed when the Finance Bill comes up for discussion.

Mr Kanwar has pointed out that though the reduction in corporate tax rate for domestic companies from 35 per cent to 30 per cent is welcome, the increase in surcharge to 10 per cent coupled with the continuing education cess causes an effective tax reduction to the tune of only 3 per cent, thereby defeating the very purpose of reducing the basic corporate tax rate.

The letter notes that the imposition of the FBT regime has created some discontent. The nature of this levy appears to be that of an `expenditure tax' and takes us back to the pre-1998 scenario when such expenditure was disallowed, the chamber said.

Further, it has called for extension of the weighted deduction to all sectors of the economy as also to extend the period by around 10-15 years. The measure would also result in increasing the R&D activities in the country and help us in being recognised as an R&D centre for the world.

On the dividend distribution tax imposed on companies, the chamber held that it resulted in double taxation of business income and is thus a levy, which has never found favour with India Inc. The main contention is that it results in a cascading effect when there are multiple layers of corporate structure.

Further, FICCI has suggested withdrawal of the banking cash transaction tax in its entirety, move the 30 per cent tax level to income beyond Rs 5 lakh, with a target of 10 lakh in the coming years, to bring the agricultural income, especially income from commercial crops beyond Rs 5 lakh within the tax net to be taxed at a flat rate of 15 per cent.

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