The Hindu : Business : Tax on cash withdrawal, fringe benefits to stay: Chidambaram

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Saturday, Mar 05, 2005

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Tax on cash withdrawal, fringe benefits to stay: Chidambaram

By Our Special Correspondent

NEW DELHI, MARCH 4. Asserting that the cash withdrawal tax — with a revised cap — and the Fringe Benefits Tax (FBT) are here to stay, the Union Finance Minister, P. Chidambaram, today invited industry representatives to help his ministry officials "re-write'' the chapter on FBT to tweak the "anomalies'' and ensure that legitimate business expenditure is not brought under the tax net.

Addressing industry captains here at a conference organised by the Confederation of Indian Industry (CII) here, Mr. Chidambaram asked industry to co-opt two representatives from each of the three apex chambers (CII, FICCI and Assocham) who could sit with his North Block mandarins and look at the entries to see if "any unintended anomalies need to be corrected.'' In the same breath, he assured industry that "there will be enough time for corrections. We must allow the final shape of the Finance Bill to emerge. Rules will be framed then,'' he said.

Explaining the rationale and philosophy of his budget and the reason why the Centre has to scour for resources on the fringes, the Minister said that over and above an allocation of Rs. 50,000 crores, he had to provide Rs. 25,000 crores to meet the NCMP objectives as the "demands were very large to make up for lost time.'' These large allocations by itself would spur growth during the new fiscal.

In addition, the recommendations of the Twelfth Finance Commission (TFC) had imposed a burden of Rs. 26,000 crores, which had to be factored into the Budget.

The customs duty had to be reduced to keep in line with the East Asian levels and hence, the only avenues left to mop up revenue were the direct taxes, the services sector and the FBT.

The only reason that such large allocations could be made, he said, was the 6.9 per cent growth in the gross domestic product (GDP) achieved in the current fiscal. And, while setting an over seven per cent growth target for the new fiscal, Mr. Chidambaram assured the gathering that the government would not do anything to retard the growth engine running at "full speed'' now.

"We must grow by over seven per cent, which means agriculture must grow by 3-4 per cent, industry by 8-9 per cent, manufacturing by 9 per cent and services by 8 per cent,'' he said, and yet again added, "My Government will do nothing to hamper growth...

The growth engine is humming and moving at full speed and we will not let it flutter or falter.''

Mr. Chidambaram also disclosed that a new comprehensive Income-tax Bill would be drawn up by the end of next fiscal to clean up the complex and archaic laws. A number of provisions and exemptions need to be cleaned up,'' he said.

The Minister also proposed to bring in a system by which the Government would be able to get production data and excise liabilities on a daily basis through an online system.

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