FBT removal brings cheers to ad industry

Advertisers, especially fast moving consumer goods companies, are a happy lot after Finance Minister P Chidambaram removed fringe benefit tax (FBT) on free samples and product window displays.

However, mobile content developers and design companies are likely to be hit with the development and supply of content for mobile value added services and design services being brought under the service tax net.

With the retail boom, window product displays and sampling at the point of sale gaining popularity, industry experts predict spends on promotion, in-store and point of purchase displays will increase significantly from the present 20-30 per cent share of the marketing budget.

After the FBT was introduced last year, the industry has been appealing to the finance ministry to exempt sales promotion schemes from its ambit since the incurred expenditure cannot be treated as employee benefits.

The Ficci, in its 15-point fiscal agenda, had requested for genuine business expenses, especially those incurred on sales promotion including publicity, be outside the purview of FBT, as it also results in making tax assessments easier.

The withdrawal of FBT on sampling and window displays could boost the below-the-line advertising (non-television, print and outdoors). The move has delighted majority of the industry players who distribute samples as a sales promotion activity.

"This is a positive measure since the expenditure incurred is genuinely for sales promotion and it cannot be treated as employee benefits," said Bharat Patel, Chairman, Procter & Gamble.

He is also the chairman of the Indian Society of Advertisers. Sunil Duggal, CEO, Dabur India said, "This will help in reducing the complexities of FBT, and will be greatly beneficial for the industry."