The Hindu Business Line : Fringe benefit tax stays, but in toned-down version

THE Finance Minister, Mr P. Chidambaram, on Monday announced a host of changes to the controversial fringe benefit tax (FBT) that was proposed in the Union Budget for 2005-06.

Through the amendments to the Finance Bill, the Minister has sought to make the FBT more palatable to India Inc without foregoing revenue interests.

Besides excluding individuals and Hindu Undivided Family (HUF) engaged in business or profession from the purview of FBT, Mr Chidambaram has also acceded to the requests of registered charitable trusts by taking them out of the FBT net.

Further, the Finance Ministry has dropped the earlier provision of "any direct or indirect reimbursement made by the employer to his employees for any purpose" from the ambit of fringe benefit.

While Mr Chidambaram has attempted to bring some cheer to India Inc by slashing the base levels - that is, the percentage of the fringe benefit that would be subject to tax - there was bad news for those employers expecting relief on the contributions made to superannuation funds of their employees.

The entire contribution to superannuation funds would be subject to FBT.

On sales promotion including publicity, the Finance Minister has now said that any expenditure on advertisement (including rentals) of any form in any print (including journals, catalogues or price lists) or electronic media or transport system would not fall under the category of sales promotion and therefore, would not attract FBT.

Further, expenditure on holding press conferences or business conventions, fairs or exhibitions, sponsorship of any sporting event, advertisement by way of signs, artwork, paintings, banners, direct mail, billboards, kiosks and hoardings, would not be considered as sales promotion expenses for the purpose of FBT.

The amendments also clarify that any expenditure on statutory obligation or to mitigate occupational hazards or provide first aid facilities in the hospital or dispensary run by employer would not be counted as "employees' welfare" for the purpose of FBT.

On the issue of conference, Mr Chidambaram has clarified that other than the participation fee, any expenditure on conveyance, tour and travel (including foreign travel), on hotel or boarding and lodging in connection with any conference would be counted as expenditure and, therefore, brought under FBT.

Even as he revamped the base level for various expenses, Mr Chidambaram has left the tax rate on fringe benefits untouched at 30 per cent.

He has, however, granted some relief to the software, hotels, pharmaceutical and construction industries on the issue of base value computation for certain expenses (conveyance, tour and travel including foreign travel and hotels).

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