The controversial Budget proposal of cash withdrawal tax has drawn flak from Institute of Economic Growth Director B B Bhattacharya and former Finance Secretary S Narayan.

Delivering a talk on Budget 2005-06, Narayan wondered whether the proposal would be legally feasible, while Bhattacharya said it is not a well thought-out move.

However, Bhattacharya in-principle supported the proposal of fringe benefit tax but said the finance ministry has not done enough homework before coming out with the levy. Narayan evaded a reply on the issue.

"I am not able to understand what kind of tax is cash withdrawal tax. It is not income tax, it is not excise duty, nor is it customs duty, or service tax. I wonder whether it fits in the overall structure of the Act under which it is sought to be imposed," Narayan said in reply to a question from the floor.

Cash withdrawal of Rs 10,000 from banks on a single day, on which the Budget proposed to impose a levy of Rs 10, is a tiny sum in today's context, Bhattacharya said, adding that banks do have record of account holders which they can share with government.

He said lack of centralised information network is a major drawback that the present banking system suffers from.

Elaborating, he said if a person holds accounts in more than one bank, it becomes difficult for government to track him.

This problem arises because banks do not have information about account holders of other banks, Bhattacharya said, adding that centralised network would do away with this shortcoming.

Finance Minister P Chidambaram had said he will consider any better suggestion than cash withdrawal tax to establish an audit trail.

On FBT, Bhattacharya said there is no doubt that companies misused these benefits.

However, benefits like membership to clubs or luxury travel for executives should be taxed instead of all 17 entries proposed in the Budget, he said.