FinMin says no to relaxation of FBT norms for exporters

The finance ministry has turned down a commerce ministry proposal to provide relaxation to exporters, reeling under the impact of the global financial meltdown, from payment of Fringe Benefit Tax (FBT), saying such benefits cannot be granted to one section of taxpayers.

The issue of relaxing the FBT norms for foreign travel undertaken for export purposes was raised by commerce ministry officials at a recent meeting of the Committee of Secretaries.

The proposal, sources said, 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 legislature.

Moreover, the revenue department officials added that such benefits cannot be restricted only to the export sector.

The commerce ministry officials were of the view that 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 negative zone in October declining by 12.1 per cent.

With major economies of the world, including US, 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 an employer on facilities or amenities provided by them to their staff. The incidence of tax depends upon the kind of facilities provided by the employers.

The exporters have been asking the government to relax FBT for travel by employees who have to frequently go abroad in connection with exports.

The government has already announced a host of measures, including interest subvention of 2 per cent and pre and post shipment credit at lower rates, to boost exports.