The Hindu Business Line : Corporate India wants FBT proposal scrapped

AFTER making presentations on various aspects of the proposed Fringe Benefit Tax (FBT), India Inc now wants this proposal scrapped. The Finance Ministry is reviewing the proposal and has constituted an informal committee headed by Mr Parthasarathy Shome, Advisor to the Finance Minister. for this purpose.

According to corporate India, the FBT would lead to lot of ambiguities and uncertainties and result in pushing up the compliance cost considerably because of filing a separate return, payment of advance tax, assessments and appeals. This would affect the competitiveness of companies, industry sources said.

A quick estimate by the Federation of Indian Chambers of Commerce and Industry (FICCI) shows that taxing the companies for business communication, knowledge enhancement, sales and marketing expenses would mean a rise in taxes by about 5-9 per cent.

"The intention of the Government is to move towards the ASEAN tax rates. And since no ASEAN country has the concept of FBT, why should then we deviate and adversely affect the competitiveness of our industry," a FICCI spokesperson said.

Industry sources also pointed out that the FBT would be an impediment to companies trying to go global. "To be present in the competitive international market, companies have to incur expenses on brand building through advertisements, travelling and sales promotions. FBT would hinder such activities,'' they said.

Listing objections to the proposed tax, the sources said the FBT fails to recognise the basic distinction between capital and revenue expenditure, that is, expenses connected with business and those not. It would, therefore, lead to varied interpretations, resulting in protracted litigation.

Further, the definition of FBT includes direct or indirect reimbursement made by the employer to employees for any purpose. This, the captains of industry felt, was extremely wide ranging. Also, conferences had to be organised frequently between dealers and company employees and labelling such expenses as fringe benefits was totally unwarranted, the FICCI spokesperson said.

A section of corporate India felt that festival celebration expenses should not be part of FBT. Further, company's contribution to approved superannuation funds were in the nature of welfare benefits for employees, particularly when the country had no defined social security arrangements, industry sources said.

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