Even as India Inc gave a grudging, lukewarm response to the watering down of the fringe benefit tax and withdrawal tax by Finance Minister P. Chidambaram, top industry veterans warned that the workload at appellate tribunals and courts will increase due to the cumbersome process of filing returns.‘‘Certainly, this is good news as we have been demanding changes in fringe benefit tax and withdrawal tax,’’ says construction major Larsen and Toubro Managing Director A.M. Naik. ‘‘But we have to still wait for more details.’’ Adds Y.P. Trivedi, Mumbai-based tax laywer and director of various companies including Reliance: ‘‘The FM is just increasing the work load of tax lawyers and his own income tax department.’’Corporate India had raised a hue and cry over the FBT and withdrawal tax, when the FM announced in February an across-the-board tax on expenditure of companies on items including advertising, sales promotion and employee benefits. The main grouse of corporates is that FBT is a tax on expenditure and increases paperwork.On Monday, the Finance Minister announced that he will exclude expenditure on advertisements from the levy. But at the same time he said any privilege, service or amenity provided directly or indirectly by an employer by way of reimbursement or otherwise to employees will attract FBT, which is to be paid by employers.Similarly, any free or concessional ticket provided by the employer for private journeys of employees or their family members and any contribution to an approved superannuation fund for employees will come under the purview of FBT.‘‘Both FBT or withdrawal tax are not good either for corporates or for the individuals. Just wait for some time you will see how income tax courts get clogged with these new cases,’’ Trivedi says. Agrees the chief of a finance company, ‘‘The government should have scrapped the FBT. There’s no reason for taxing expenses. It’s complicating the tax structure in the country.’’The FM also said today entertainment, provision of hospitality of every kind by the employer to any person, whether by way of provision of food or beverages or in any other manner will attract FBT.This does not include any expenditure on or payment for food or beverages provided to employees in office or factories and any expenditure or payment through paid vouchers usable at eating joints or outlets and conference, other than fee for participation by employees.The corporates’s main grouse was that tax officials will get blanket powers to decide how and what basis the officials will calculate the tax considering that there was no precedent. ‘‘The government should have just said a particular percentage of expenditure will not attract income tax benefits instead of coming out with this new cumbersome proposal,’’ says Trivedi.ALL NEW FBTDeemed Fringe Benefit(The FBT is 30% of the deemed fringe benefit of the employers’ expenditure)100%Employer’s contribution to superannuation fund, free/concessional tickets for private travel50%Festival celebrations, use of club, health club, gifts, scholarships20%Entertainment and hospitality (minus food provided in the office or paid vouchers), conferences (all expenses minus conference fee), sales promotion, publicity (minus advertising), conveyance, tour and travel, maintenance of cars and aeorplanes (including fuel), use of hotels, boarding and lodging; use of telephones (minus expenditure on leased lines), guest house.5% Special RateExpenditure on hospitality by hotels; conveyance by construction firms; conveyance and hotels by IT and pharma firms; maintenance of motorcars by transport firms; maintenance of aircraft by airlines (nil)
