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Journalism of Courage
As the finance minister P Chidambaram today announced that the fringe benefit tax will continue, corporate CEOs and lawyers realised that they have a long battle ahead with the government on the FBT front.
Many corporates have already filed suits against the government for levying tax on expenditure as the Indian constitution has given powers to the government to levy tax on income alone. “This was a big disappointment,” says YP Trivedi, a Mumbai corporate lawyer who moved the court against the government. “The filing of returns and paperwork will now grow. All our suggesstions have been thrown out,” he added.
The fringe benefit, according to the government, is levied on any privilege, service, facility or amenity, directly or indirectly, provided by an employer to his employees, besides any contribution made by the employer to an approved superannuation fund for the employees.
In his last Budget, the FM has levied tax on any expenditure if the employer has in the course of his business or profession, incurred any expense on or made any payment for the purposes of entertainment, hospitality, conference, sales promotion including publicity.
Though the FM decided to remove FBT on free medical samples of medicines to doctors, the pharma industry is not jumping with joy. “Free samples are only one-third of our FBT costs,” says Habil Khorakiwala, Chairman of pharma major Wockhardt. “There are many heads where the FBT is levied,” he added.
The FM today also reduced the FBT on tour and travel, hospitality from 20 per cent to 5 per cent. The finance bill today also clarified that any free or subsidised transport by the employer to his employees for journeys from their residence to the place of work or return will not form part of fringe benefits. This will benefit the software and outsourcing companies who are spending a lot in ferrying their employees from their home to office.
Contribution by an employer to an approved superannuation fund to the extent Rs one lakh per employee will also not attract fringe benefit tax. Anything above that will attract the tax.
Despite these changes, the CEOs are not happy. “This is a retrograde step… we have not heard last of this FBT demon,” sums up a corporate lawyer.
