Tax compliance on top for meal card issuing cos

Mumbai: During sales at shopping malls, it was not uncommon to spot someone using his accumulated meal vouchers to pay for a shirt or a small toy — a habit not in keeping with the spirit of income tax (I-T) laws, which provide an exemption to meal vouchers subject to certain conditions.

The RBI’s requirement that meal vouchers can only be in digital form, come January 2018, will aid better tracking and could nip any misuse. Asignificant number of companies — which provide meal vouchers to their employees — have already made the shift towards digital cards, while others are in the process of doing so. Companies that issue digital meal cards are aiding in such a transition.

Sodexo BRS India launched its digital meal benefit solution in February 2016. With a client base of 11,000-plus corporate clients, Sodexo is working towards completing the migration process by December. Edenred India, which laun-

Prepaid meal cards shall be in electronic form and reloadable

No cash withdrawal or fund transfer should be permitted via such cards ched its digital card-based solutions, currently caters to more than 3,500 corporate clients across its various offerings. As regards meal cards, 85% of its clients have already adopted the digital ‘Ticket Restaurant Meal Cards’ and the remaining 15% will make the shift by December end. Zeta, which provides digital prepaid solutions for the salaried, has over 1,100 corporate clients for its digital meal vouchers, thus catering to nearly 2.5 lakh end users.

In the transition towards digital, some clarifications would be welcomed by India Inc. “It would help if the I-T authorities provided a clari- Should be non-transferable

Should be useable only at eating joints

There is a Rs 50 cap per meal (for it to be a tax-free perk in hands of employee) fication that the term ‘paid vouchers’ in rule 3 (7) (iii) covers ‘electronic meal cards’ so as to avoid any future litigation. Incidentally, the I-T Act during the Fringe Benefit Tax regime (applicable from financial year 2005-06 up to 2009-10) had specific provisions for tax exemption on ‘electronic meal cards’,” points out Sonu Iyer, leader and partner, People Advisory Services at EY India. However, three senior I-T officials with whom TOI spoke expressed the view that paid vouchers would normally cover digital meal cards.

Iyer cautions that companies should ensure that compliance with the conditions prescribed in rule 3. Here, steps taken by digital meal card-issuing companies come in handy.

Suvodeep Das, VP (marketing) at Sodexo BRS India, says, “The Sodexo meal card is PINbased and requires a specific activation process that the card- holder needs to perform — this assures security as well as nontransferability. When accepting payments via our meal cards, the merchant is contractually bound to serve only food and non-alcoholic beverages.”

Adds Johann Vaucanson, MD, Edenred India, “When we talk about tax exemption, the notion of compliance is central. We do so by signing a contract with each and every merchant partner to ensure that our prepaid instruments are used in accordance with the tax rules set out for exemption purposes.”

Bhavin Turakhia, CEO & co-founder, Zeta, says, “The ‘Zeta Super Card’ can be used only at outlets and restaurants that sell or serve food and non-alcoholic beverages. We have curated our merchant list to ensure that all regulatory requirements are always adhered to.”