The festive cheer arising out of corporate offices this season may be somewhat smothered by the fringe benefit tax (FBT), which has to be paid on corporate gifts. |
However, the manufacturers of favoured gift items - such as televisions, home appliances, and watches - put up a brave face, expressing hopes of only a minimal impact. |
"Companies won't stop giving gifts, but they might cut down on the expenses by 10-15 per cent," said Shivani Powell, director, Selectives India, which specialises in corporate gifts. |
Ravissant - a luxury and lifestyle store that caters to Taj Hotels, Apollo Tyres, East India Petroleum, DCM Shriram - expects a 40 per cent drop in business this festival season. |
Usually, Ravissant generates 10 per cent of its total revenues in the festival season. The store says many companies are planning to do away with employee-related expenditure that attracts FBT. |
Corporate gifting is a relationship-building tradition and firms will have to weigh their options before deciding on the issue. Havell's employees get a gift voucher on Diwali and the practice, according to director Anil Gupta, is likely to continue. |
Lack of clarity in the industry about FBT and its impact on business still exists, a Titan executive said. |
LG Electronics, however, remains unfazed. It expects its corporate sales to increase by 50 per cent this year to Rs 150 crore, with festive season sales expected to fetch the company Rs 45-50 crore. |
"There will definitely be an impact, but we don't expect FBT to deter companies from buying gifts," said Dhananjay Chaturvedi, product group head, institutional sales, LG. |