The Hindu Business Line : India Inc disappointed over FBT retention

INDIA Inc has expressed disappointment with the retention of the fringe benefit tax (FBT) in the amendments to the Finance Bill 2005-06 passed by the Lok Sabha on Monday.

While terming other measures such as the scrapping of the tax on cash withdrawals from saving accounts and raising the cash threshold on withdrawals from the current account for individuals and companies a welcome step, corporates raised concerns that the implementation of the FBT may impact their competitiveness.

Reacting to the amendments to the Finance Bill, Mr Sunil Kant Munjal, President of the Confederation of Indian Industry , said that the FBT "was presumptive in nature, it was a tax on expenditure and could lead to disputes and litigations. Ideally, CII would have liked to see the proposal to levy FBT withdrawn."

The Federation of Indian Chambers of Commerce and Industry also noted that the continuation of "FBT at 30 per cent would adversely affect the competitiveness of the corporate sector." It felt that the Government should reconsider this step and withdraw the FBT altogether.

"India is moving towards ASEAN levels for Customs and other taxes and this could be a good benchmark. No ASEAN country has the concept of FBT in their tax laws and we should also follow the same practice," the Chamber added.

Mr K.N. Memani, President, PHD Chamber of Commerce and Industry, said that it was "unfortunate that the Government had not recognised the constraints of the business in the current competitive environment and was trying to usher in a system of levying expenditure tax. The provisions go beyond the intent in the Budget and would lead to heavy burden on all organisations".

Meanwhile, the President of the Associated Chambers of Commerce and Industry, Mr Mahendra K. Sanghi, welcomed the proposal of the Government to dilute the controversial FBT, saying that the Chamber has been seeking amendment to this effect ever since these proposals were mooted in the Finance Bill 2005-06.

PricewaterhouseCoopers' Executive Director, Mr Shyamal Mukherjee, said that some relief had been given to the pharmaceutical and computer software industry wherein the expenses on travel and hotel facilities would now be taxed at 1.683 per cent as against earlier rate of 6.732 per cent.

"However, some anomalies still remain. A separate return and assessment procedure could have been done," he said.

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