Confederation of Indian Industry has demanded the removal of Fringe Benefit Tax and various other direct tax reforms to help manufacturing sector grow at 12 per cent and the economy at 8 per cent.
In its pre-budget memorandum, the confederation said, alternatively the firms, which are already paying taxes should be given an option to pay additional one per cent corporate tax and be exempted from the FBT, levied in this year's Budget.
"This way, firms can choose to avoid number of hassles and complications involved with the discharge of FBT liabilities. Yet, the government's objective of widening the corporate tax net will also be achieved," the memorandum said.
The chamber said the scope of items covered under FBT is unduly large with the existence of several categories of business expenditures for which no benefit accrues to employees.
Taxing expenses on traveling, hotel boarding, sales promotion, conference expenses are genuine business expenditures that only affects the competitiveness of industries in the global market, the chamber said.
FBT is particularly affecting the fast growing knowledge-based sectors such as software, IT enabled services, pharmaceuticals, travel and hotel, where FBT related expenses constitute a large portion, the memorandum added.
The complex procedures relating to filing of return in respect of FBT further adds to the cost, it said.
To boost the manufacturing sector, which has the potential to create more jobs, CII proposed reintroduction of investment allowance.
"This will provide incentives for expansion, modernisation, setting up new facilities by allowing 25 per cent deduction on investment in plant and machinery," the memorandum said.
CII also suggested that the weighted deduction of 150 per cent of the expenses incurred on scientific research should be extended to all sectors to encourage companies across sectors to undertake in-house scientific research and commissioned R&D in academic institution and public sector laboratories.
It also proposed that weighted deduction of 150 per cent of the expenses incurred on scientific research should be extended for a period of at least five years.
The chamber also suggested that one rate of corporate tax be imposed on corporates in place of many cess and surcharges like 2 per cent education cess.
CII also called for increase in depreciation rates for computer hardware and other equipment forming part of any computer system from 60 per cent to 100 per cent for the next four years.
It further suggested that depreciation rate in other sectors be raised from 15 per cent to 25 per cent, provided the same rates or higher rates are charged by corporates under the Companies Act.
The chamber said the revision in depreciation rates has increased the life span of plant and machinery from 10 years to 17 years for growth oriented manufacturing units and from 11 years to 17 years for other units.
The increase in lifespan for fully depreciating plant and equipment is not justified in the current environment of high technology obsolescence and may discourage technology upgrade and machinery replacement, it said.
© 2026