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Tuesday, Feb 28, 2006


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Will Budget dilute FBT provisions, usher in EET?
Lower level of peak customs duty, rationalisation of duties for petroleum industry likely

Our Bureau

Insurance FDI hike?
Mr Chidambaram may also reiterate the Government's resolve to hike FDI in insurance to 49 per cent.

Mr P. Chidambaram

New Delhi , Feb. 27

With the Finance Minister, Mr P. Chidambaram, all set to present the third Budget of the Manmohan Singh Government on Tuesday, there is heightened expectation that the fringe benefit tax (FBT) would undergo changes to make it easier for corporates. Alongside, he is expected to remove contributions to superannuation funds from FBT and bring them under the exempt-exempt-tax (EET) regime where the tax would be levied only at the withdrawal stage. A general announcement of the EET regime may also be included.

Mr Chidambaram would have to take a tough call on the Securities Transaction Tax since there is pressure from the Left to raise resources through this mechanism. At the same time, the Minister would like to avoid a dampener on the booming stock markets. But there is heavy betting on tax exemptions on longer-term bank deposits so as to attract funds into banking channels to feed the rising investment demand from industry and to keep interest rates from hardening.

Not much change is expected on the personal (direct) tax front as collections on this score have been below target in the current year.

On indirect taxes, expectations are for a lower level of peak customs duty in keeping with ASEAN levels and a roadmap for a Goods and Services Tax. Similarly, customs duty reduction and excise rationalisation for the petroleum industry could be on the cards, in line with the recommendations of the Rangarajan committee.

Infrastructure status, and thereby tax exemptions, for gas pipelines and mega power plants is another highly anticipated announcement.

Related Stories:
Economists for retaining FBT, phasing out tax sops for software
FBT merits further study
FICCI urges relook at surcharge hike, fringe benefit tax
Turning over a turnover tax
Moving quietly towards EET
EET: An exercise in pettifogging
Expert panel to study roadmap for EET method of taxation
Plan for EET-based savings taxation system by Oct 31
Panel on EET system of taxation submits report

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