Industry makes its budget-wish: decrease the rate or abolish FBT

The run up to the Union Budget is generally seen as a period of intense negotiations between the finance ministry and the industry where various industry associations stretch their imagination and ask for everything under the sun.

The run up to the Union Budget is generally seen as a period of intense negotiations between the finance ministry and the industry where various industry associations stretch their imagination and ask for everything under the sun. But this year8217;s Budget which is already being perceived as something where the chambers have a small role to play, apex industry bodies CII and Ficci have come up with interesting takes on issues like FBT and corporate taxation.

After P. Chidambaram8217;s statements during the presentation of budget 2006 where he reiterated that FBT has been simplified but will stay in place is facing objection from form CII which is demanding its abolition while adding that 1 per cent corporate tax could be levied to make up for the loss in revenue. After presenting budget 2006 Chidambaram had said that FBT has been pruned taking into consideration some of the recommendations by India Inc but the debate on the issue should now cease.

8220;FBT is regressive for the industry and we cannot put up with it. Taxing the expenditure incurred by a company on business related activities is illogical. If it8217;s because of revenue considerations that the government is not able to do away with it, then we have no opposition to a 1 per cent addition to corporate taxation,8221; said CII President R. Seshasayee.

Ficci has, however, demanded a decrease in corporate taxation and is going slow on FBT. Ficci wants the government to further simplify FBT while asking for a 5 per cent reduction in corporate tax from the 30 to 25 per cent. 8220;Corporate tax burden is now exceeding 40 per cent when we take into account surcharge, education cess, FBT and dividend distribution tax. If we are looking at ASEAN levels of taxation of 28 per cent then it has to be drastically brought down,8221; said Ficci Secretary general Dr Amit Mitra.

Ficci8217;s demands are based on the fact that the revenues increased when corporate tax was cut from 35 to 30 per cent in last year8217;s budget. Chidambaram himself admitted that tax collections have been robust in the first half of this fiscal and the set targets of keeping fiscal and revenue deficits at 3.8 and 2.1 per cent respectively would be met. The chamber believes that with the overall economy on an upswing, a further reduction will give a fillip to the growth without compromising on revenues.

CII on the other hand has maintained a stoic silence on the issue of corporate tax. The chamber is of the opinion that as the revenue base increase the government would on its own bring the level of taxation down. 8220;Our priorities right now is on indirect taxes and FBT. We are aware of the revenue aspects and do not want to pressurize unnecessarily. Corporate taxation will be tackled later,8221; said a CII official.