NASSCOM demands changes in FBT

NEW DELHI: NASSCOM in a pre-budget memorandum to the central government demanded that expenses on sales promotion, meals and medical insurance should be excluded from the Fringe Benefit Tax (FBT).

It said FBT should be made applicable only to expenses, which have a direct connection with the employees.

"ITES/BPO industry should be treated at par with the IT Industry as the same is in harmony with the other provisions of the Income Tax Act," NASSCOM demanded.

The industry body also urged the government to do away with the separate return and assessment proceedings.

Among the demands, is the suggestion to provide a clear definition of export turnover in a proportionate manner by using the formula, Deduction = Export turnover x Profit of the business of the undertaking.

To boost the business prospects of the BPO industry and address the concerns of non-residents, NASSCOM recommends amendments in the Income tax law to include “arm's length price” and doing away with the non-resident's tax liability for outsourced work.

According to NASSCOM, “India will gain sizeable additional revenue; if not, we lose up to one billion USD in revenues and sizeable employment.”

Besides these, NASSCOM has also urged the government to take a look at rationalizing transfer pricing regulations and have a provision to allow foreign tax credit.

On indirect taxes, NASSCOM has requested the removal of an anomaly related to the rebate of service tax paid on input services used in non-taxable services that are exported and CENVAT credit for common input services.

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