?Scrap FBT, cash withdrawal tax?
Pressure Continued to mount on Finance Minister P Chidambaram to scrap the controversial FBT and CWT.india Updated: Feb 11, 2006 20:50 IST
Pressure Continued to mount on Finance Minister P Chidambaram to scrap the controversial Fringe Benefit Tax (FBT) and Cash Withdrawal Tax (CWT).
While Chidambaram has promised to revisit the twin issues in the forthcoming budget, the latest to seek scrapping of FBT and CWT are bankers and members of Parliament. Both MPs and bankers have asked the Finance Minister to consider withdrawing the twin taxes altogether, at two different meetings Chidambaram had on Monday.
Sources said that bankers, at a pre-budget review of banking sector, have asked Chidambaram to at least exempt superannuation schemes and bank employees benefits from the purview of FBT.
They argued that the FBT was eating into their profits.
Earlier in the day, the members of Parliament at a meeting of the consultative committee on Finance, also echoed that both FBT and CWT ‘were untenable’ as taxation instruments.
At the parliamentary consultative committee meeting, senior BJP leader Arun Shourie led the demand for scrapping FBT. Dinesh Trivedi, while asking for restoring the turnover tax, sought removal of FBT as it translates into double taxation on expenses.
R Prabhu has, meanwhile, asked for a comprehensive review of fringe benefit tax while rationalising the rates and simplifying the governing norms.
Interestingly enough, the PMO is favourably inclined for scrapping the FBT and cash withdrawal tax altogether without losing the revenue. Senior PMO officials are in favour of giving the corporates an option to pay 0.5 per cent higher corporate tax instead of FBT. But the companies that prefer to pay FBT must be allowed to do so, they have argued.
At the consultative committee meet, the other issues that came up for discussion were providing incentives for infrastructure and tourism, apart from restoring the NDA plan to link rivers.
Rajkumar Dhoot apparently asked for duty free import of coal while prominent hotelier Lalit Suri demanded full infrastructure status for tourism sec tor. One interesting suggestion that came up was floating tax free bonds with attractive rates to fund the Rural Employment Guarantee Programme that was kicked off by the Prime Minister last week.
Former RBI Governor Bimal Jalan apparently emphasised the need to simplify and stabilise the taxation regime rather than tinkering with the rates.
Use core sector funds Finance minister P Chidambaram has asked MPs to prevail upon the chief ministers to utilise the funds made available through the Special Purpose Vehicle (SPV) meant for infrastructure projects. Responding to demands made by the MPs, Chidambaram apparently took the position that fund flow for core areas cannot be hiked unless a shelf of bankable projects is available.
Chidambaram made no firm commitment on scrapping either the FBT or the CWT.
On complaints of harassment meted out to honest taxpayers, the FM apparently defended the income tax officials at the consultative committee meet. He reportedly told the MPs that a meagre 0.8% of tax returns were subjected to scrutiny at random that are identified by the computer systems. On inordinate delay in issuance of PAN cards, Chidambaram said that already 52 lakh cards have been issued this fiscal.