• Jan
  • 11
  • 2009

Government Put Conditions on Issue of Prepaid Meal Card

Posted In Income Tax | 16 Comments » Print Friendly and PDF

Background :-The Finance Act, 2008, w.e.f. from 1 April 2008, introduced a new concept of Electronic Meal Cards (‘EMC’), for the purpose of Fringe Benefit Tax (‘FBT’) on hospitality expenses. Hospitality expenses do not include any expenditure incurred by an employer on provision of EMCs (Section 115WB(2)(B)(iii) of the Income-tax Act, 1961), which fulfils the prescribed conditions. Accordingly, FBT will not be payable on expenditure incurred on such EMCs. Hospitality expenses are valued at 20% of the expense incurred for the purpose of FBT (except in case of certain industries).

The CBDT has notified conditions for the purpose of valuation of hospitality expenses (Rule 40E(i) of the Income-tax Rules, 1962)  for the purpose of FBT.

The conditions prescribed with regard to EMCs are:

(i) The card shall be granted by the employer to its employees under a scheme framed by the employer specifying therein the circumstances under which the meal card can be used by the employee;

(ii) The above card shall be issued by the “issuing bank” (as defined);

(iii) An employee shall not be issued more than one card;

(iv) The card shall bear the name of the employer along with the name, photograph and signature of the employee to whom the card is issued;

(v) The card shall be used only by the employee to whom the card is issued;

(vi) The card shall be used by the employee only for the purpose of purchasing ready to eat food or non-alcoholic beverage from a “member establishment” (as defined);

(vii) 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; and

(viii) The details of each transaction of purchases made by the employee against the card shall be maintained by the employer and the member establishment in such manner and for such period as is required under the Act for any other similar transaction.

The explanation to the rule clarifies:

(i) “issuing bank” means a banking company as defined in the Act3–

a. which issues the card to the employees of an employer in pursuance to an agreement entered into with the employer; and

b. which has entered into a contract with the member establishment authorising him to allow purchases against the card issued by it in accordance with the conditions stipulated and

(ii) “member establishment” shall mean a restaurant, hotel, canteen or an outlet which sells ready to eat food or nonalcoholic beverage, but shall not include a restaurant, hotel, canteen or an outlet selling alcoholic beverage.

Comments :- With Electronic commerce gaining importance in India, EMCs will help the organisations and employees to keep track of expenditure incurred on food and beverages. It is important to note that now a limit of Rs 100 per day, per employee, has been specified for the EMCs.

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INCOME TAX NOTIFICATION NO. 1/2009, DATED 5-1-2009

INCOME-TAX ACT (FIRST AMENDMENT) RULES, 2009 IN SECTION OF RULE 40E

In exercise of the powers conferred by section 295 read with sub-clause (iii) of clause (B) of sub-section (2) of section 115WB of the income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-fax Rules, 1962, namely :

1. (i) These rules may be called the Income-tax (First Amendment) Rules, 2009.


(ii) They shall come into force with effect from the 1st day of April, 2009.


2. In the Income-Tax Rules, 1962, in Part VIIC, after rule 40D, the following rule shall be inserted, namely:


“Prescribed conditions for the purposes of sub-clause (iii) of clause (B) of sub-section (2) of section 115WB.


40E. For The purposes of sub-clause (iii) of clause (B) of sub-section (2) of section 115WB, the non-transferable pre-paid electronic meal card (hereinafter called The “card”) shall fulfill the following conditions, namely:


(i) The care shall be granted by the employer lo its employees under a scheme framed by the employer specifying therein the circumstances under which the meal card can be used by The employee.


(ii) The card under clause (i) shall be issued by the issuing bank.


(iii) An employee shall not be issued more than one card.


(iv) The card shall bear the name of the employer along with the name, photograph and signature of the employee to whom the card is issued.


(v) The card shall be used only .by the employee to whom the card is issued.


(vi) The card shall be used by the employee only for the purpose of purchasing ready to eat food or nonalcoholic beverage from a member establishment.


(vii) The aggregate amount of ready to eat food or nonalcoholic beverage purchased during a day by an employee shall not exceed one hundred rupees.


(viii) The details of each transaction of purchases made by the employee against the card shall be maintained by the employer and the member establishment in such manner and for such period as is required under the Act for any other similar transaction.

Explanation. – For the purposes of this rule,


(i) “banking company” shall have the same meaning as assigned to in clause (viii) of sub-section (1) of section 36 of the Act’


(ii) “issuing bank” means a banking company –


(a) which issues the card to the employees of an employer in pursuance to an agreement entered into with the employer,and


(b) which has entered into a contract with the member establishment authorizing him to allow purchases against the card, issued by it in accordance with the conditions stipulated in sub-clause (iii) of clause (B) of sub-section (2) of section 115WB and this rule,and


(iii) “member establishment” shall mean a restaurant, hotel, canteen or an outlet which sells ready to eat food or non-alcoholic beverage, but shall not include a restaurant, hotel, canteen or an outlet selling alcoholic beverage.”

[F. No. 133/70/2008- TPL]


16 Responses to “Government Put Conditions on Issue of Prepaid Meal Card”

  1. Srinath says:

    Is there a way to change the max capping? Or is there a way to redress it to the Govt for chnage?

  2. Sushobhan says:

    If my expenditure is more then 100 Rs. a day, does it mean that the tax benifit will be only on 100 Rs. and not above?
    Or I can not have transaction of more than 100 Rs. a day?

  3. Nitin Zaa says:

    You can buy food items from reliance hypermart

  4. Prakash says:

    My 6000 Rs is stuck in the Axis-Bank Meal-Card; and I am unable to use any amount because of the same issues that you all are facing. Is there any way out? I have checked with my employer and the Bank; they do not seem to help much. In that case, we have only left with the option of requesting through PIL (Public Interest Litigation) or is there any way we can bring this into notice of concerned departments and get quick response.

  5. Since FBT been removed now so this provision lost its relevance.

  6. Deepak says:

    Companies anyway place a cap on a monthly amount. Why place any restriction on a daily amount in the first place? Like a Sodexho voucher, just allow employees to use this “monthly amount” as he/she pleases.

    Seriously, as others have pointed out, any Visa outlet fixes a lower amount of Rs 150 or so – thus the food card is automatically invalid in 95% of the locations.

    Sandeep, if you have the capability, please highlight this issue and have them take the cap away.

  7. Raj says:

    There are no use of Meal cards now , because many of the restaurent do not accept the cards for less than or equal 100 rs .

  8. Jitendra says:

    100 Rs. per day is just ridiculous. I would not be able to buy even two meals per day from my office cafeteria in that amount. Don't know why government should put such a ridiculous cap.

  9. Chandra says:

    Government should make mandate to its staff including Central and State to use this card.Then only they will come to know the exact problem with this new rules.it does not make any sense to limit per day to Rs.100.00.Government is collecting multiple taxes for a single product that customer buyes.There should be a mechanism to return public money back to the public who pays multiple taxes which is baseless.I think only government can have this Meal card usage by taking its family for a dinner.

  10. sendhome says:

    These guys donno what is the cost of the food outside.You cannot have even a butter Naan and kulcha.Many wont accept card if you dont purchase upto 150Rs.Its ridiculous and direct attack on employees.Please send this Govt to home.They are there to rob us.

  11. Sandeep Kanoi says:

    Dear Friend ,You need to subscribe for Email updates which is free. Subscription box is provided on the top-right side of Website in sidebar.

  12. DSP says:

    Thanks Sandeep. Appreciate if you could post any further developments in this matter to my email ID.

  13. Sandeep Kanoi says:

    As far as justification is concerned I fell Amendment against the interest of taxpayer should not be retrospective. But in our country we are use to of this type of policy decision. Amendment is applicable to A.Y. 2009-10 and thereafter.

  14. DSP says:

    Hi,

    How is it justified by applying the notification released in Jan 09 retrospectively from April 2008. Isnt it applicable for the FY 2009-10 and thereafter?

    Pls clarify

    Thanks.

  15. Sandeep Kanoi says:

    This apply from the assessment year 2009-10 covering previous year that begun on 01.04.2008.

  16. Anand says:

    Hi,

    Can you please clarify from which date this amendment will come into effect ? Is the date mentioned above (01-Apr-2009) refers to financial year 2009-10 or Assesment year 2009-10 ?

    If the date mentioned is AY 2009-10, then this means the change in regulations are effective with retrospective efffect for all meal card transactions carried out since 01-Apr-08.

    Please clafiry.

    Thanks

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