Date:24/02/2006 URL: http://www.thehindu.com/2006/02/24/stories/2006022407580500.htm

Karnataka - Bangalore

BCIC calls for abolition of fringe benefit tax

Special Correspondent

`Simplification of VAT procedures and streamlining of input tax credit accounting and TDS in VAT are important'

Bangalore: Bangalore Chamber of Industry and Commerce (BCIC) has urged the Government to come out with a budget that will address issues such as fringe benefit tax (FBT), value-added tax (VAT), research and development, service tax, education and information technology (IT).

Anant R. Koppar, BCIC President, said FBT should be abolished or simplified. An alternative could be increasing corporate tax by a suitable percentage and doing away with FBT.

Levy

As FBT is on a presumptive basis, it is being levied on genuine business expenditure in which employees are not enjoying any collective benefits. Thus the basic purpose of introducing the levy — taxation of collectively enjoyed benefits by employees — is being defeated.

The business process outsourcing sector should get parity with the IT sector on FBT and VAT.

`Form C'

Non-availability of `Form C;' filing of numerous documents; problems regarding refund of input tax credit in excess of output tax; maintenance of books of accounts and reconciliation thereof, and problems regarding TDS mechanism in VAT system are the key areas of concern.

The Government should consider the possibility of permitting manufacturers and dealers use self-generated, pre-numbered forms.

To start with, this facility may be given to manufacturers/dealers having a turnover above a certain limit, and after monitoring the situation, the limit may be brought down.

Simplification of VAT procedures and streamlining of input tax credit accounting and TDS in VAT are important.

Mr. Koppar said the time limit for approval of companies by the prescribed authority should be extended by another 10 years. Provisions in the rules restricting companies to be "exclusively" engaged in research and development activity needs to be relaxed, he said.

Incentives

With investment in infrastructure projects being slow, the levy of service tax on such projects at high rates will further dampen the development of infrastructure projects.

Incentives should be advanced to this sector rather than burdening it with taxes, Mr. Koppar said.