Twin pillars of the knowledge economy, pharma and IT, shared the spotlight of a toned-down Fringe Benefit Tax on Monday. The amended Finance Bill reduces the deemed fringe benefit on expenses on conveyance and hotels from 20 per cent to 5 per cent.Though pleased with the sop, the two sectors widely reiterated their earlier position: They can do without the new tax altogether. The dilution, if anything, has sent a strong signal to industry that the FBT is here to stay.‘‘I would like to ask, why even 5 per cent. Just because pharma and IT are growing sectors, does not mean they should be an additional tax on them,’’ said S. Krishna, Pfizer India’s head of corporate affairs in Delhi.The fast-growth pharma and IT sectors are opposed to FBT due to their increasingly global nature, which requires employees to travel frequently. Both sectors also spend heavily on promotional and marketing activities as they go professional and global. All these fall under FBT’s purview.On its part, Nasscom had also asked for total exemption from FBT, arguing that it unfairly covered legitimate business expenses such as employees’ travel, board and lodging and even the food coupons given during essential training exercises.‘‘Nasscom had asked for complete withdrawal of FBT, but this is a step forward,’’ said Nasscom President Kiran Karnik.As a result, pressure is mounting for clarifications and simplification of the new tax. Mastek Chairman Ashank Desai said, ‘‘Dilution will reduce the impact, but I will really like a tighter definition. There must be more clarity.’’Satyajit Bandyopadhyoy, Chief Delivery Officer, Ness Technologies (India) Ltd said, ‘‘We welcome the dilution, but it will still be an impediment, as our business model requires frequent foreign travel for most employees.’’All privileges, services or amenities provided to employees will attract FBT, including free or concessional travel tickets for private journeys, contributions to superannuation funds, entertainment, hospitality, food or beverages in offices or factories and paid meal vouchers.Ravi Ramu, CFO, Mphasis BFL adds, ‘‘Its an improvement, but a lot of confusion still remains — while he (the FM) has said legitimate business expenses will not be taxed, taxing travel will be very difficult for the IT industry.’’Welfare expenses will attract FBT too, except when they are to meet statutory obligations, mitigate occupational hazards or provide first aid in an employer-run hospital or dispensary.OTHER MEASURES• Specific excise duty on molasses, which was raised from Rs 500 a tonne to Rs 1,000 a tonne, reduced to Rs 750 a tonne. • Four pc countervailing customs duty on components for mobile phone manufacturing exempted.• Optional excise duty on nylon tyres cut to 8 per cent.• All parts of computer, including CPU and mouse, to be covered under 7 per cent import duty.• CVD on nets for tuna fishing reduced from 16 to 8 per cent.
