India Fringe Benefit Tax on Travel Expense Payments to Contractor

Others 1989 views 5 replies
We are an IT company in India and we have  employees and some outside non-employee contractors - all based in India.  We ask our india-based contractor to visit a customer on our behalf in a foreign country on the customers request for a business purpose. The contractor submitted an invoice with his travel expenses and receipts. What if anything do we have to do with regard to FBT in this case ? Our CA suggests that we should pay FBT from our company for this expense even though it is done by contractor.
 
Who should have to pay the FBT, if any.
 
If we, the company have to pay it, then should it be at the rate for IT companies ?
 
Replies (5)

There are two approaches:

Conservative: Since FBT is charged on deemed basis on 20% of the entire value of fringe benefit, it implies that the law assumes 20% of the entire expenditure as pertaining to employees. Accordingly, the travel bills submitted by your contractor will be added to other travelling expenses and 20% of the whole shall be deemed to be the value of benefit provided to the employees. In such case, the opinion of your CA is right.

Aggresive: the basis of levy of FBT is to bring to charge benefits provided to employees as such.Since the contractor is not an employee, we can always defend that it does not attract FBT. But, if you follow this approach, you must be ready for litigation

You need to make a cost benefit analysis and select any of the aforesaid approaches

The FBT is to be paid by the person who has incurred the expenditure. In your case, the contractors have spent the mony on travel. Though this amount is being reimbursed by the company, but FBT will be paid by the contractor and not by the company.

In My view This will falls under FBT. because..

1. Contractor is not our Employee

2. He is performing this service as per contract with company for specific service.,You deduct TDS on all amount as per bill inc. travekling exp.

FBT if any will be paid by contractor only.

if you will treat as reimbursement of travelling exp. then situation will be different, you may have to FBT.

 

according to me expenses incurred by the contractor is not liable for FBT as he is not the employee of the company.You  are only required to deduct the TDS for the amount paid to the contractor. 

Whether FBT is applicable on AIR/ Rail/ Bus fare. Please send me reply on my email.


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