FM may re-examine tax on sales promotion

Travel expenses would not come under the ambit of the fringe benefit tax.

Finance Minister, P Chidambaram said today he would review whether employers would have to pay tax on sales promotion and publicity under the "fringe benefit" tax.

"We will take a look at it and see why the draftsmen put it there," Chidambaram said in an interview to a television channel.

He added the expenditure incurred by companies on their employees' travel and lodging while on official work would be a "business expense", which would not come under the ambit of the fringe benefit tax.

He pointed out the government had, in fact, a few years ago introduced a perquisites tax, which was accepted by the industry. Employees have to bear this tax.

Government would aim at raising Rs 5,000-7,000 crore, adding the government could raise between Rs 50,000 and Rs 70,000 crore over the next five years.

He reiterated the cash withdrawal tax was not a revenue raising measure. "You do not have the information that we have. Now all withdrawals above Rs 10,000 will be subject to a tax, which will leave a tax trail. This does not concern the honest tax payers but certain other 'big fish'. Wait and see until the rules are made," Chidambaram said.

The finance minister said there was no question of expanding the scope of exemptions. The Kelkar Committee, in fact, had recommended further removal of exemptions, he pointed out.

The minister said changes in the direct and the indirect taxes were being brought in through a separate Bill that would be introduced in a month's time in Parliament. "The Finance Bill covered only those measures that had revenue implications," he said.

Clarifying on the special purpose vehicle (SPV) for infrastructure, Chidambaram said Rs 10,000 crore would be raised as rupee reserves for providing long-term lending to infrastructure projects, either directly through the SPV or from financial institutions and banks.

Referring to the subsidies in the oil sector, Chidambaram said the problem of subsidies cannot be resolved unless the administered pricing mechanism was dismantled. "I agree this (subsidy) is a problem, but no immediate solution is available," he said.

The minister said North Block along with the Planning Commission would work out a system to measure development outcomes.

"There is no point in economic reforms if the results do not filter through. We are keen on an outcome and will work to ensure that," he added.