According to the finance ministry, the Independence Day and the Republic Day are not 'festivals' as normally understood and hence expenditure on celebration of these two occasions will not be liable to FBT.
Besides festivals, expenditure on get-together of employees and their families on non-festival occasions, including annual day, will also attract FBT, a recent circular on FBT issued by the finance ministry said.
On stock option or any such scheme, the circular said though the value of any benefit provided by the employer to its employees by way of allotment of shares, debentures, or warrants is a fringe benefit, FBT will not be charged because of the absence of computation provision in respect of such benefits.
Also, expenditure incurred by a professional like a lawyer or auditor on conveyance, tour and travel, and reimbursed by the client is not liable to FBT in the hands of the client since it is essentially a professional fee.
The FBT is also not charged on the expenditure incurred for the purpose of imparting in-house training to employees.
However, FBT is payable on any expenditure incurred towards food and beverage, tour and travel, and lodging and boarding in connection with such in-house training of employees.
Expenditure incurred for attending training programmes organised by trade bodies or institution is liable to FBT, according to the circular.
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Also, any expenditure incurred for the purpose of conference is liable to FBT irrespective of whether the conference is of agents or dealers or development advisors or any other persons.
Brokerage and selling commission paid for selling goods will not attract FBT since courts have held that they are in the nature of ordinary selling expenses, the circular said adding they are not expenditure for the purposes of sales promotion, including publicity.
Also expenditure relating to salesmen appointed by distributors for company's products reimbursed through credit notes is not liable to FBT.
Such expenditure is a component of commission, brokerage, services charges or margin to distributors and, therefore, in the nature of ordinary selling expenses, the circular said explaining why such outlays do not attract FBT.
FBT is also not levied on sales discount or rebates allowed to wholesale dealers or customers from the listed retail price. Such rebates represent lesser realisation of the sale price itself and are in the nature of selling expenses, the circular said.
The finance ministry gave the same logic for not levying FBT on the bonus points given to credit card customers.
Also incentives given to distributors for meeting sales targets do not attract FBT since they are in the nature of ordinary selling cost, the circular said.