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Small companies axed by fringe tax
February, 13th 2007

Arun Gumber is working on his latest campaign, to launch his own brand of speakers across the country. His company Akriti Plastics, which until last year only supplied hardware to other IT companies, has a big plans, and a budget to match.

"Direct marketing expenses involve exhibitions, travelling, boarding and lodging. Ours is a new company and most of the expenditure is to be done on this behalf," says he.

But, every time Arun sends his sales force to dealers in the market or outside the city, his company - with a modest turnover of Rs 50 lakh - faces a taxing prospect.

"There are fringe benefit taxes that have been levied upon us -boarding, lodging and air travel - all related to the company. For people like me who have started from scratch its very unfair," says Arun.

Fringe benefit tax or tax paid has been a burning issue ever since it was introduced two years ago and many believe that specifics like travel, dealer meets and sales promotions - more company activities than employee perks - need be axed.

For a small company like Arun's, its proving to be a big burden.

"Chidambaram ji, we are a medium enterprise, our turnover at this point is less than Rs 1 crore. We are yet a loss making company. Don't you think there should be a threshold limit for imposing the fringe benefit tax?" asks a troubled Arun.

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