The dreaded fringe benefit tax is unlikely to be withdrawn in the next year's Budget despite mounting pressure from the apex industry chambers.
"I don't envisage that FBT will be removed. There is no such thinking in the finance ministry," Parthasarathy Shome, advisor to the finance minister, said in New Delhi.
However, changes suggested by various industry bodies and other quarters would be studied in the Budget making process, Shome said.
Leading industry chambers CII and FICCI have demanded removal of FBT, levied in this year's Budget for the first time.
In its pre-Budget memorandum, CII proposed that the government should withdraw FBT and carry out various other direct tax reforms to help manufacturing sector grow at 12 per cent and economy at 8 per cent.
The confederation said alternatively the firms which are already paying taxes should be given an option to pay additional 1 per cent corporate tax and be exempted from the FBT.
"This way, firms can choose to avoid number of hassles and complications involved with of the discharge of FBT liabilities. Yet, the government's objective of widening the corporate tax net will also be achieved," the memorandum said.
The chamber said the scope of items covered under FBT is unduly large with the existence of several categories of business expenditures for which no benefit accrues to employees.
Expenses on travelling, hotel boarding, sales promotion, conference expenses are genuine business expenditures and taxing them only affects the competitiveness of industries in the global market, CII said.
FBT is particularly affecting the fast growing knowledge-based sectors such as software, IT enabled services, pharmaceuticals, travel and hotel, where FBT related expenses constitute a larger portion, the memorandum added.
The complex procedures relating to filing of return in respect of FBT further adds to the cost, it said.
Former FICCI president Onkar S Kanwar had said at the chamber's AGM, "Corporate India today pays 30 per cent corporate tax on its profits. Another 3 to 4 per cent as dividend distribution tax and another 3 to 4 per cent on fringe benefit tax raise the burden. We strongly feel that FBT must be abolished."
Calling FBT bad in law and economics, PHD Chamber of Commerce and Industry secretary general Bibek Debroy said it is not a tax on income and should not have been levied in the first place.
It taxes expenditure, often on heads where the government has abdicated its responsibility of providing services, the renowned economist said.
FBT was imposed in this year's Budget on employers for those benefits given by them to employees collectively, which could not be taxed at the hands of employees.
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