FBT and Commodity transaction tax abolished

Finally Bowing to the long standing demand of India Inc, finance minister Pranab Mukherjee has abolished the fringe benefit tax and commodity transaction tax. in union budget 2009 - 10 which he presented today in parliament (see budget highlights)

However, Minimum Allocation Tax (MAT) on book profits has been increased from 10 percent to 15 percent, but with a provision of carrying forward the tax credit on MAT to 10 years from the current seven years.

Govt may remove FBT & Service tax on exporters

Removal of Fringe Benefit Tax(FBT) and service tax exemption for exporters in the Budget are under active consideration of the Finance Ministry, a highly placed official said.

Commerce Secretary Rahul Khullar today met Finance Secretary Ashok Chawla and is believed to have pressed for several fiscal incentives for exporters, who are suffering due to the ongoing recession in major markets.

India's exports have been contracting for the last seven months in a row, costing millions of jobs in labour oriented sectors like gems and jewellery and textiles, industry estimates suggest. In 2008-09, exports grew by a meager 3.4 per cent to USD 168.7 billion.

Khullar met Chawla a day after he had a meeting with a delegation of the Federation of Indian Export Organisations.

The exporters have been demanding removal of the FBT on the ground that the business promotion expenses should not be treated as fringe benefits and should not be taxed.

The other major demands, including outright removal of service tax on exporters, is also under consideration of the government, the official said.

At present exporters get reimbursement for the service tax but it involves several procedural hassles. They want total removal of this tax.

courtesy - economictimes

Govt might put an end to Fringe benefit tax this budget

(27/5/09 - FBT updates) - The government is considering a proposal to put an end to fringe benefit tax (FBT) — the tax on all benefits and perks that companies provide to their employees introduced in the 2005-06 Finance Bill — in the coming Union budget, according to revenue officials familiar with the development.

FBT, at Rs 8,000 crore last year, accounted for just over 2% of the total direct tax collection of Rs 3.4 lakh. There is a view that collections from this unpopular tax is too minuscule to worth all the paperwork involved, officials said on condition of anonymity.

From Day One, corporates opposed FBT not just on account of adding to the tax burden, but because of the huge additional paperwork and accounting complications involved in estimating a company’s FBT outgo.

FBT is levied on perquisites provided by the employer to the employee in addition to the regular salary. This is a tax paid by the employer on the benefits or perks that the employee receives. It includes components like the employee’s accommodation, entertainment, travel expenses and phone calls. Later Esop too was brought under the FBT umbrella.