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Indirect tax body CBEC launched electronic payment system for accounts offices of excise and service tax. It also introduced a new software to make the accounting system within the Central Board of Excise and Customs (CBEC) fully automated. Revenue Secretary P V Bhide inaugurated the e-pay system, software and a website for Chief Controller of Accounts, CBEC.


After automation, information for accounting headwise, reports on collection of duty and other items will be easily available. The government wants to replicate the same system on the customs side as well, the Controller General of Accounts, CBEC, C R Sundaramurti, said. The system assumes importance at a time when the Goods and Services Tax is expected to be rolled out. "Our initial brainstorming indicates that the accounting system may have to follow the existing broad framework being inaugurated today with such changes as may become necessary on the basis of the decisions of the Empowered Committee(on GST)," Sundaramurti said.

Employees enjoying perks such as chauffeur-driven cars, rent-free accommodation, club memberships, credit cards and meal vouchers could find the next four months a little too harsh on their wallets as they may have to cough up the entire annual tax on such benefits during this period.

The government is set to announce the norms for taxation of fringe benefits that have become taxable in the hands of employees after a change effected in the 2009-10 Budget, a finance ministry official told ET. The norms will detail how the perks will be taxed and what benefits will come under the tax net. In the absence of guidelines, most companies are yet to start deducting tax on fringe benefits. Therefore, the tax burden for the entire financial year from April 1, 2009 will be distributed over the remaining four months, that too, if apex tax agency Central Board of Direct Taxes (CBDT) allows companies to do so. This would mean lower net salaries in the remaining months of the current financial year for employees enjoying such benefits. If the apex direct tax body fails to make such a provision, employers will have to deduct the amount in the month the rules become effective. The July 2009 Budget dropped FBT and returned the earlier system of taxing perks in the hands of the employee. Now, the value of the perk specified by CBDT will be added to an employee's income and taxed accordingly. For example, as per the earlier perquisite taxation rules that were in effect before FBT was introduced, the value assigned to an 800-cc car was Rs 1,200.

This value of Rs 1,200 was added to a taxpayer's total income in the year and taxed accordingly. Since perks are fully consumed and have no savings element, any tax burden on them will have to come out of disposable income. Any major departure from the pre-FBT rules would create an enormous burden for the salaried class. Employees of those companies that had already started deducting tax on these benefits as per the old rules, which were in effect before the controversial FBT was introduced in 2005, would not be hit so hard as they would have paid some tax. However, as the overall liability is likely to be more due to the government's plan of bringing more benefits under the tax net, they too will have to shell out additional amounts.

Many companies have been deferring the decision on taxation of the perquisites. Now, as the financial year-end is approaching, companies are proposing to use the existing rules that were applicable prior to the withdrawal of FBT and finalise tax computations.

In the perks taxation regime before FBT, perquisites that were taxed included rent-free accommodation, car, chauffeur, services of personal attendants, concessional education, concessional journeys, credit card, interest-free loans, gift vouchers, hotel stay exceeding 15 days and medical facilities. The value of these services was the actual cost to the employer.

He said that the government has made this modification on its own. Salaries of the CEOs should be decided by shareholders, he added Khursheed, who inaugurated the 37th national convention of the Institute of Company Secretaries of India, said the new Bill, which was tabled in the Lok Sabha in August, was being examined by a parliamentary standing committee. He, however, hinted that executives should think as responsible citizens before deciding on huge salaries.

Khursheed also said that the Serious Fraud Investigation Office (SFIO) will continue its probe into alleged corporate law violations by Satyam founder B. Ramalinga Raju, but other agencies would probe alleged violations in foreign exchange rules. He added that foreign exchange violations would be probed by the Enforcement Directorate, revenue manipulations would be looked into by the income-tax department and other cases would be investigated by the Central Bureau of Investigation. The ministry had devised a system where the government would be able to detect corporate frauds at an early stage, he said. There will be 15 warning parameters that would be applied to firms that are under scanner, he said-Officials will periodically check on revenues, profits and other issues such as employees strength. The system will sound an alert if there is any abnormality in the records, he said.