The Budget speech clearly says that the fringe benefit tax is on perks, while the Finance Bill says it is on expenditure. Which one is correct?
Most people who read the Finance Bill are not lawyers. I am not blaming them for this. If you read the charging section of the Bill, it is clear that we intend to tax fringe benefits, not legitimate business expenditure. We want to tax perquisites which are charged collectively and not charged to individual expenditure.
There are companies and hotels that are spending massively on such benefits. They are paranoid about these provisions.
Precisely. They do not know how to read the Bill. Last year, similar questions were raised about the Annual Information Returns and some of the sections of the Bill. I explained it to them. The ambiguities have been cleared and all that have died down.
I remember there were even front page reports in some newspapers that you have to file even the list of groceries you buy. Therefore, I think the draftsmen have done their job and as I read it, the intention is very clear that it taxes only fringe benefits which are collectively enjoyed by employees.
Will you take a re-look at some of the items like advertisement and sales promotion?
Rahul Bajaj pointed this out to me. He pointed out two items. I will now ask the draftsman the reason for putting them in. These are all minor things.
What happens to a company like, say Infosys, which sends many people abroad, or a call centre where telephone calls are made?
Let me tell you that legitimate expenditure is not fringe benefit. A fringe benefit is something that is given to employees individually or collectively. When the benefits are individual, they come under personal tax. And, if they are collective, they come under fringe benefit.
Can I ask you how much are you going to get out of this?
It depends on how industry responds. If many of them repackage the perks as salary, it will come as tax on income. All depends on how salaries will be packaged. I need to raise money to meet my expenditure.
Do you see more money flowing into the stock market as a result of personal tax reforms?
I am not going to tell them where to invest. Each person has his or her own way of looking at investment avenues.
To take that point further, many people feel that FIIs have come into India in a big way and not too much of domestic money is flowing into the markets. The percentage of Indian savings is very low. Do you see this changing and funds slowly coming in from pension funds etc?
It is very difficult to project behaviours. As I said, you must simply tell people that you can save up to Rs 100,000. How you will save, where you will save, I leave it to you. In six months or twelve months, a pattern will emerge. I believe that this item-wise investment is completely out of place.
One of the odd things in the Budget is that you have announced an enormous increase in expenditure while the total government expenditure has gone up by just 2 per cent. Many increases that you have announced in expenditure are actually the expenditure states will undertake by borrowing from the market. That really is not part of the Budget.
Total expenditure is in two parts
