The Customs, Excise and Service Tax Appellate Tribunal recently determined the applicability of service tax in relation to Sodexo meal vouchers sold by the appellant under the taxing entry for business auxiliary services.(1)

The tribunal observed that it was the employer that had purchased the meal vouchers, not the employee. The tribunal further noted that under the voucher scheme, the user of the voucher (ie, the employee) was required to buy goods and services only from affiliates of the appellant. The tribunal argued that this restriction imposed on employees when redeeming the voucher was tantamount to promotion of the goods and services of the affiliates, and therefore the appellant provided business auxiliary services to its affiliates.

The appellant had contended that the meal vouchers were similar to credit or debit cards, but this argument was rejected by the tribunal on the grounds that with a debit or credit card, the cardholder can buy goods or services from almost any business establishment and is not restricted to selected affiliates, as is the case with vouchers. The meal vouchers were further distinguished from debit or credit card transactions on the basis that the appellant retained the entire amount, even in respect of unutilised vouchers.

The decision will have implications for other transactions of a similar nature (eg, issuance of gift vouchers by retail chains or e-commerce entities).

For further information on this topic please contact Ranjeet Mahtani or Divya Jeswant at Economic Laws Practice by telephone (+91 22 6636 7000), fax (+91 22 6636 7172) or email ([email protected] or [email protected]).


(1) Sodexho Pass Services India Private Limited v Commissioner of Service Tax, Mumbai / Commissioner of Service Tax v Sodexho Pass Services India Private Limited 2013-TIOL-1838-CESTAT-MUM.