NEW DELHI: Taking a stringent view and dashing exporters’ hopes for relief, the Union Finance Ministry is learnt to have rejected the Commerce Ministry’s proposal to exempt exporters, reeling under the impact of the global financial meltdown, from payment of the Fringe Benefit tax (FBT), asserting such benefits cannot be granted to one section of taxpayers.
Official sources said the issue of relaxing the FBT norms for foreign travel undertaken for export purposes was raised by Commerce Ministry officials at a meeting with the Committee of Secretaries.
The Ministry proposal was shot down by the Revenue Department, which argued that any move to relax the FBT, which was introduced in Budget 2005 by the then Finance Minister, P. Chidambaram, would have to be done across-the-board with the approval of Parliament. The Revenue Department officials have also argued that such benefits could not be restricted only to the export sector. “As such decisions have financial implications, only the newly elected Government at the Centre would be able to address the issue in the full fledged budget likely to be presented in June. It is not something which can be done or undone through an executive order,” a senior Ministry official remarked.
The Commerce Ministry officials felt that the FBT component with regard to foreign travel should be relaxed to spur exports which are worst hit as a result of the global financial crisis. India’s exports, after a gap of seven years, moved into the negative zone in October declining by 12.1 per cent. With major economies of the world including the U.S., Japan and the Europe slipping into recession, India’s exports continued to remain in the negative for the last four months slipping by 16 per cent in January.
Under the Income-tax Act, FBT is paid by employers on facilities or amenities provided by them to their staff.