The Hindu Business Line : Govt to issue circular on FBT queries by month-end

THE Union Ministry of Finance will issue a circular by the end of this month addressing issues, questions, and apprehensions that have been raised in various quarters over the fringe benefit tax (FBT).

Addressing a seminar on FBT, organised by the CII-Eastern Region, Dr Parthasarathi Shome, Advisor to the Union Finance Minister, said that over a hundred queries and clarifications had been received on the issue. Most of these would be addressed in the circular that would be issued.

Dr Shome sought to clarify several matters that were raised at the meeting. He said that the rationale behind FBT was to ensure efficiency of resource allocation by taxing all factors of production equitably.

In accordance with the global trend, India too is moving from an indirect taxation regime to a direct taxation regime.

"There is a concern that FBT may not be the right way of going about," he said, and dwelt at length on the rationale of introducing FBT.

According to him, FBT would also address the issue of inequity of taxation within the corporate sector.

He clarified that all income currently included in the salary of individuals would not be brought under the purview of FBT.

"Many of the fears would not have been there if one were to go through the provisions pertaining to FBT with a fine-toothed comb."

Mr Shome admitted that in terms of taxation issues, FBT does necessitate additional requirements. But, he said, "It needs to be seen if there are serious impediments in accounting."

Mr Pallav Gupta, General Manager (Taxation) of ITC Ltd, highlighted issues and concerns pertaining to FBT faced by industry.

He said that FBT should not be applicable on expenses incurred on non-employees.

Also, employee perks should not be taxed if FBT has been paid since that would amount to double taxation.

Similarly, there could be risk of double taxation in the event of expenses incurred by one company being reimbursed by another.

Mr Gupta wanted to know whether a particular expenditure subject to FBT could be disallowed in IT assessment.

He questioned the applicability of FBT on leave travel assistance paid to employees, medical reimbursement, and ESOPs.

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