The Hindu Business Line : `FBT will hit IT, ITeS, pharma, FMCG sectors'

FRINGE Benefit Tax (FBT) provisions are untenable, as they affect business travel, entertainment and hospitality expenses and, particularly, the superannuation schemes. The IT, ITeS, pharma, FMCG and the insurance sectors have especially been badly hit.

Speakers at the Assocham-BCIC seminar here on Wednesday said the recent circular on the FBT, had still not brought up all issues raised by the imposition of the tax. Mr K.R. Sekar, Partner, Deloitte Haskins and Sells, said there was a need to fix a minimum threshold limit for each expense for FBT purposes, and ensure that genuine expenditure was not taxed.

When costs are incurred for business convenience, such as employee travel costs that are reimbursed by a customer, there was no validity in the amount being taxed under FBT, said Mr Ravi Vishwanathan, Finance Director, Sun Microsystems India. "In the end, companies will structure the cost in such a manner that the burden will be borne by employees, resulting in productivity losses," he said.

FBT was not an entirely new concept; it was imposed in India not to imitate legislation in other countries, but due to the inventive accounting practices of companies and also to restrict certain employees getting unintended benefits, said Mr J.K. Rao, IRS, Chief of Commissioner of Customs, Bangalore.

Group insurance premium collections had fallen in the past four months, since no company implemented superannuation schemes fearing the FBT, said Mr Sandeep Shrikhande, Head - Institutional Business, Kotak Mahindra.

The imposition of the FBT on such schemes had the potential to reduce the savings and old-age security of employees of many private companies, he said.

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