17 June,2009 12:18 PM IST | | PTI
The Finance Ministry is contemplating diluting provisions of Fringe Benefit Tax (FBT), by which companies may not have to pay taxes on certain perks and allowances availed of by employees.
Although industry has been pleading for a complete abolition of FBT in the forthcoming Budget, to be presented on July 6, sources said the Finance Ministry is against it because of revenue implications. However, they added the ministry is looking at the possibility of diluting the provisions of FBT and may exclude expenses on various items, which do not directly benefit employees.
The expenses related to marketing and sales promotion may go out of the purview of FBT, as they do not benefit the employees directly, sources said.
"The best thing for the government would be to abolish FBT completely," said Satya Poddar, senior partner, Ernst and Young, adding that the realisation from FBT is less than Rs 10,000 crore, not even three per cent of the total direct tax collection.
FBT was introduced by the then Finance Minister P Chidambaram in the 2005-06 Budget to "tax many perquisites (which) are disguised as fringe benefits, and escape tax".
Under the current dispensation, an employer has to pay FBT at 30 per cent on the fringe benefit, the taxable value of which is determined in accordance with a formula.
