Special Correspondent

`BCIC's suggestion to levy a flat tax rate in lieu of FBT has been rejected'

Bangalore: Fringe benefit tax (FBT) is here to stay after Union Finance Minister P. Chidambaram declined the demand of the information technology (IT) industry to remove legitimate business expenses from the ambit of the controversial levy that was introduced last year.

After announcing a few modifications to FBT, Mr. Chidambaram expressed confidence that the debate on the levy "will now draw to a close". But industry is far from satisfied.

Anant R. Koppar, President, Bangalore Chamber of Commerce and Industry (BCIC), said it is "disappointed" with the continuation of FBT. BCIC had suggested a flat tax rate in lieu of FBT, but it was rejected by the Finance Minister.

"Though the Finance Minister has simplified/removed some of the glaring discrepancies of the FBT introduced last year, it is a pity that this archaic levy has come to stay. It's now up to us in the industry to confine it to the fringes and not waste any more of our valuable time on this," K.P. Unnikrishnan, Marketing Director, Sun Microsystems, said.

`A positive budget'

The domestic semiconductor industry will see investments in wafer manufacturing, assembly-test-mark-packaging (ATMP) plants, flat/LCD, plasma panel displays and other high-technology information technology products in the wake of announcements by Mr. Chidambaram in his budget speech, representatives of the industry feel.

"The budget is extremely positive for the growth of the semiconductor industry. We will see the formulation of a policy with focus on semiconductor manufacturing. The cluster development model to promote manufacturing and build new industrial townships will help build the Fab City model. The announcement on infrastructure, with projects on international airports, roads and power, will provide impetus for semiconductor manufacturing, as investments in infrastructure by the Government are crucial for the sector's development," Poornima Shenoy, President, India Semiconductor Association (ISA), said.

SemIndia Inc., the first entity to announce the setting up of a silicon chip manufacturing, assembly and testing facility in the country, said the budget offers incentives for the industry to establish itself and make domestic manufacturing of semiconductors and electronics a "viable opportunity". "The budget augurs well for semiconductor and other high-end manufacturing industries," Vinod K. Agarwal, Chairman, SemIndia, said.

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