TIOL Tube
Forgot Password |  Register  
Friday , October 28, 2016 | Updated : Oct 27, 19:56 IST
GST   Income Tax    Customs    Excise    Service Tax    FEMA    DGFT    SEZ    Misc    Pitara    Budget   
About Us Contact Us
CBDT takes APA tally to 108 (See 'TII Brief' in Cabinet okay release of first dues of DA payments Bangalore CX Commissioner gets addl charge of Bangalore Customs Chennai Customs Commissioner gets addl charge of Trichy Customs Cabinet grants assent for one time relaxation in Horticulture cost norms (See 'Mixed Buzz') Cabinet reviews grades of Posts & Telecommunications Accounts & Finance Service (See 'Mixed Buzz') World Gold Council floats campaign to drive awareness on availability of Indian Gold Coin (See 'Mixed Buzz') EPFO paired with Common Services Centers for ease of EPF members (See 'Mixed Buzz') Prohibition of Benami Property Transactions Act - CBDT notifies jurisdiction of certain officers across India as specified authority (See 'Notification 100' in 'What's New') RBI permits Person resident outside India to transact currency derivative contract + FEMA - Subsidiary allowed to issue shares to its non-resident holding company against preoperative expenses up to the threshold of 5% (See ‘FEMA Notification’ in ‘Fema)’ CBDT fears revenue shortfall; calls for fresh strategies & close monitoring (See 'Mixed Buzz') Income tax - Whether transfer of assessment file from jurisdiction of one AO to another is valid even if there is no agreement between two jurisdictional Commissioners - NO: Supreme Court (See 'Breaking News') GST Tryst with Three Fault lines! (See 'The Cob (Web)' Column) Kerala General Sales Tax Act - sale by brand name holder or trade mark holder to be first sale for purpose of Sec 5(2) - KAIL is brand name owner of 'Sansui': SC (See 'Breaking News') GST - Air conditioners and hawai chappals cannot be taxed at same rate - Jaitley (See 'DDT' Column) I-T - Whether when assessee's explanation about cash deposits in his savings account was concurrently rejected by both Commissioner and Tribunal, it warrants intervention by higher courts - NO: HC (See 'Breaking News') New Zealand keen for early FTA finalisation: PM (See 'Mixed Buzz') Cus - Committee has not applied its mind - Mere accordance of approval to appeal because impugned order is not in favour of Revenue is not proper discharge of duties statutorily assigned: CESTAT (See 'Breaking News') Benami Transaction (Prohibition) Amendment Act, 2016 Comes into Force from 1st November (See 'DDT') ST - Amount charged by club to its members for sale of items such as liquor is not taxable as evidences such as sale bills, balance sheet, CA certificate and VAT statements submitted to Sales Tax Department evidencing such sale are available: CESTAT (See 'Breaking News') Issue of Intimation under section 143(1) of Income-tax Act, 1961 beyond the prescribed time in non-scrutiny cases – CBDT Issues Order (See 'DDT') ACC okays appointment of S Girish Kumar as CMD of HMT Ltd + S K Choudhary as CMD of IRCON CBEC goes for fresh procedure for clearance of imported metal scrap (See 'Cir 48' in What's New) Delhi DRI seizes firearms, Drone and Steroids at Foreign Post Office; Consignment came from France CII says there are major ground-level changes in Investment Climate (See 'Mixed Buzz')
Bookmark and Share
Negative Blues-X: Employee recoveries

JULY 09, 2012

By G Natarajan, Advocate, Swamy Associate

THE definition of service under Section 65 B (44) of the Finance Act, 1994 specifically excludes “a provision of service by an employee to the employer in the course of or in relation to his employment”. But what about the services provided by the employer to their employees? Sounds strange?

The employer might be having a canteen in his factory / office premises. The caterer who provides the catering service would be rendering outdoor catering service to the employer and he would be liable to service tax and there is no doubt about it. If the employer is charging any amount from the employees towards provision of food, what will be the service tax liability in the hands of the employer for such amounts recovered from the employees?

It may be noted that as per Section 66 E (i) of the Act, the following is a declared a service.

“service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity”.

This is the clause by which the restaurants selling food items are also made liable to the levy of service tax. So, strictly speaking, the employer would be liable to pay service tax on such recoveries. But the following exemption is available under S.No. 19 of Notification 25/2012.

Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having (i) the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, and (ii) a licence to serve alcoholic beverages.

Though, it is difficult to cherish that the canteen in the workplace is a restaurant, it is so. Hopefully, none of the employers would be having a licenced bar facility in their canteen (What about Mr. Vijay Mallaya?). Hence, they can claim the above exemption and need not pay any service tax for the amounts collected from their employees towards cost of food supplied in canteen.

Many employers also charge their employees towards providing transportation facility for them from their home to work place. They would have engaged the services of a rent a cab operator for this purpose, who would be charging service tax and there is no dispute about it. Subject to specified conditions, the employer may also be liable to discharge a part of the rent a cab operator's liability under reverse charge and there is no confusion in this regard also.

But, when the employer is collecting some amount from the employees for the facility of such transport, the employer is providing a service to their employees and strictly speaking the employer would be liable to pay service tax. But, the following exemption under S.No. 23 (b)of Notification 25/2012 can be claimed in such cases.

23. Transport of passengers, with or without accompanied belongings, by -

(b) a contract carriage for the transportation of passengers, excluding tourism, conducted tour, charter or hire.

Like the above, there may be many other amounts collected by the employers from their employees. Recovery of part of the cost towards undergoing medical treatment in the hospital run by the employer, would be exempted under S.No. 2 of Notification 25/2012. Any recovery towards providing residential accommodation would be covered under the negative list entry – Section 65D (m).

What about the employer providing telephone facility to the employee and recovering some amount towards personal use of such telephone? What amount the employee providing a car (not being a contract carriage) to the employee and recovering some amount towards its personal use? It remains to be seen whether there are any other recoveries which may throw up a service tax liability in the hands of the employer.

Sub: Employee recoveries

Really a good analysis. The same way, there are situations where employer recovers from employee for not fulfilling contractual obligation like - recovery on account of not continuing in employment after foreign deputation or higher education as per terms of contract.

We welcome author's view on the aforesaid situations.



Posted by AA AAA
Download on the App Store
Get it on Google play
TIOL Subscriptions
 All-In-One Package
 Indirect Tax Package
 Income Tax Package
<< More Packages>>
Income Tax Customs Excise Service Tax FEMA DGFT SEZ Misc Pitara Budget
  • Income-Tax Rules
  • Income-Tax Act
  • Notifications
  • Circulars
  • Instructions
  • SC Cases
  • HC Cases
  • ITAT Cases
  • Advance Ruling
  • Settlement
  • Other Cases
  • Directorate of Income Tax (Systems)
  • Reports
  • Customs Rules
  • Tariff Notfn
  • CVD
  • Non Tariff Notfn
  • Circulars
  • Anti-dumping Notfn
  • Safeguard Duty Notfn
  • SC Cases
  • HC Cases
  • Cestat Cases
  • Advance Ruling
  • Settlement
  • Drawback Cases
  • MISC Circulars
  • CCRs - 2004
  • Central Excise Rules
  • Tariff Notfn
  • Non Tariff Notfn
  • Circulars
  • SC Cases
  • HC Cases
  • Cestat Cases
  • Advance Ruling
  • Cesses Notfications
  • Excise Amendment
  • MISC Circulars
  • 37B Order
  • Settlement
  • Commr.(A) Order
  • Tribunal
  • GST Kitty
  • Notifications
  • Service Tax Rules
  • 37B Order
  • Circulars
  • SC Cases
  • HC Cases
  • Cestat Cases
  • Advance Ruling
  • FAQ
  • Finance Act, 1994
  • Commr. (A) Orders
  • Removal of Difficulty
  • VCES
  • Accounting Head
  • Miscellaneous
  • DIPP Notification
  • FDI Approved
  • Exchange Manual
  • Fema Notifications
  • SC Cases
  • HC Cases
  • RBI Notifications
  • RBI Circulars
  • Act
  • Rules
  • Regulations
  • Master Circulars
  • PMLA Notifications
  • Depository Scheme
  • Press Note
  • Notifications
  • Circulars
  • Public Notices
  • Trade Notice
  • FTDR Amendment 2010
  • Notifications
  • Instructions
  • Act 2005
  • Rules 2006
  • DGEP
  • State Acts
  • State Policy
  • MISC
  • SC Cases
  • HC Cases
  • VAT Cases
  • Miscellaneous
  • Service News
  • Promotion
  • Transfer
  • Deputation Posts
  • Cadre Review
  • Transfer Policy
  • Training Circulars
  • Recruitment Rules
  • Pay Commission
  • Service Cases
  • The Insider
  • MISC
  • Budget Speeches
  • Union Budgets
  • Economic Surveys
  • TRU - D. O. Letter
  • Finance Acts
  • Finance Bill
  • Budget Circular
  • A Taxindiaonline Website. Copyright © 2016 Pvt.Ltd. All rights reserved. | Powered by 4th Dimension