Section 115WB(2)(B) casts a liability
on an employer to pay fringe benefit
tax (‘FBT’) on the expenditure
incurred for ‘provision of hospitality’
to the employees. However,
expenditure incurred for food/
beverages provided in office/factory
and those paid by non‐transferable
food coupons usable only at eating
joints, have been specifically
excluded from the ambit of
‘provision of hospitality’ and hence
are not liable to FBT.
In addition to the above, the Finance
Act, 2008 in Section 115WB(2)(B)
inserted additional sub‐clause (iii),
stating that with effect from
financial year 2008-09, expenditure
incurred on non-transferable
prepaid electronic meal card usable
only at eating joints fulfilling
prescribed conditions would also not
be liable to FBT. The Income tax
Department, has now inserted Rule
40E via Notification No. 1/2009
dated 5th January, 2009 prescribing
the conditions for the electronic
meal card referred in Section 115WB
(2)(B)(iii).
Conditions prescribed under
Rule 40E
As per a combined reading of
section 115WB(2)(B)(iii) and the new
Rule 40E, an employer wanting to
issue the electronic meal cards needs to
have a tie up with a bank which, in turn
would issue the meal cards to the
employees in pursuance of the
agreement entered into with the
employer. The issuing bank will also
enter into a contract with a restaurant/
hotel/canteen/outlet selling ready to eat
food or non‐alcoholic beverage
(member establishment) authorizing to
allow purchases against the meal card in
accordance with the following
conditions prescribed under the Rule.
- The meal card shall be granted by the
employer to its employees under a
scheme framed by the employer
laying the conditions when meal card
can be used by the employee.
- The meal card shall be issued by the
issuing bank, bearing the name of the
employer along with the name,
photograph and signature of the
employee to whom the card is issued.
- An employee shall not be issued more
than one meal card.
- The meal card shall be used only by
the employee to whom the card is
issued.
- The meal card shall be used by the
employee only at a member
establishment.
- The aggregate amount of ready to eat
food or non‐alcoholic beverage
purchased during a day by an employee shall not exceed one hundred rupees.
- The details of each transaction of purchases made by
the employee against the meal card shall be
maintained by the employer and the member
establishment
It may be noted that the above conditions are
specifically in respect of electronic meal cards and are
not in respect of the existing meal coupons which most
companies are using (e.g. Sodexho, Accor etc.). These
meal coupons can continue to be used by employers
for being issued to employees. However, with respect
to these coupons, there are certain concerns – the
most important of which is dealt with below. |