Meal benefit needs to be revised immediately to match the

increase in food prices. Salaries earned have also

increased, but meal benefits for Indian employees have

not changed in the last 10 years. Government should treat

meal benefit limits as a priority reform.

KARTHIK SHEKHAR

UNITES PROFESSIONALS, INDIA

2012

Are the Meal Benefits for Employees in India

keeping up with the rising Food Prices?

GENERAL SECRETARY

Meal Benefits for Employees in India Stagnates at 2001 Levels

· The income tax exemption limit for meals to employees was fixed in 2001 and has not been revised since then despite over 100% increase in food prices;

· Due to the limits being stagnant, employers have not increased their spending on the meals as a result of which the overall quality of meals to employees have suffered;

· During the period when Fringe Benefits Tax (FBT) was applicable, the limits were removed in case of meals provided by the employer directly or through meal vouchers. A limit of Rs.100 per meal was prescribed in case of electronic meal cards. After abolition of FBT, the old provisions was reinstated but with the old limits;

· To ensure that the quality of nutrition is preserved and to encourage employers to spend more on employee meals, the limits should be enhanced by atleast 100%

Key Representations:

2 2

Meal provisions for employees and workers have been in place since the late 90's. The CBDT circular No. 15/2001 [F.No.275/192/2001-IT(B)] of 2001 describes Free Meals as a staff welfare measure. The provision being:

“Free Meals: The provision of free meals varies widely from uniform canteen food, coupons etc to lavish hotel meals. The scheme of free meals as a staff welfare had been recognized and was admissible upto Rs 35 (mandated in 1997) for each meal. The new rule does not treat as perquisite free meals if the cost per meal does not exceed Rs 50/.”

The Government has thus recognised the need for healthy meals for the employee welfare and accordingly set a limit within which an employee could be provided meal support without any tax being imposed as a perquisite.

1AThere are a number of studies which have been done by ILO , which clearly establish a relationship between good working conditions and welfare support for the worker and worker productivity. Meals for employees and workers figure high among welfare measures and in making a contribution towards enhanced productivity in any organisation.But somewhere in the interim years the Government has lost sight of the need to suitably revise the limit set looking at the price levels in the market in the year in question.

The current meal provisions for 1Employees in India state that value of free food and non-alcoholic

beverages or meal vouchers provided by the employer is exempt from income tax to the extent of Rs 50 per meal. The tax

Meal provisions for Employees in India:

Are the Meal Benefits for Employees in India keeping up with the rising Food Prices?

3

exemption is calculated on a per-meal basis.

This Limit of Rs 50/- per meal per day was decided in 2001 when the limit was increased from Rs 35/- per day to Rs 50/ per meal.

In most parts of the World, the meal benefit limit is adjusted every 2 or 3 years to Consumer Price Index (CPI) Inflation basket but surprisingly, in India, this has not been the case. Keeping in mind that the original limit of Rs 50/- per meal was set over 10 years ago and that there has been a significant increase in food prices over the past 10 years; the limit should be revised. Clear evidence can be obtained from the CPI and Commodity Food Price Index.

India uses the Wholesale Price Index (WPI) to calculate and then decide the rate of 2

inflation in the economy . Since, Food articles have only 14% weight in the WPI, it is 3

advisable to look at the CPI , to get a better picture of the situation. CPI assigns 50% 4

weightage to Food, beverages and tobacco in the index . According to the report published by the Labour Bureau, Government of India, the CPI with base year 2001, was at 199 in November, 2011. It is evident from index figures that the food prices have doubled in the last 10 years. Even if we consider the Commodity Food Price Index, it gives similar results. It includes Cereal, Vegetable Oils, Meat, Seafood, Sugar, Bananas, and Oranges Price Indices. Considering 2005 as the base year, from January 2002 to January 2012, there has been an increase of 85.530 (which

5 means an increase of 109.50 %) in the food prices (Annexure III). 6According to salary data gathered by Paycheck India website , if we calculate the

7percentage of meal benefits as a percentage of average annual salary , it is observed that this percentage is constantly decreasing over the years. It was around 6.33% in 2006 and has reduced to only 2.39% in 2011 (Annexure IV). The

2 4

scene is no different in Information and Communication Industry, where this percentage was only 2.63% in 2006 and reduced to 1.69% in 2011 (Annexure V). Thus, it is quite evident that the proportion of meal expense on average annual salary is constantly decreasing over a period. The reason for that evidently is that, absent any increase in the exemption limit, the companies have seen no reason to increase the value of the meal benefit, especially as it involves calculating perquisite value for each employee for tax purposes, which can become cumbersome. That shows a tangible linkage between the exemption limit and the quantum of benefit as part of the pay package.

A survey of basic food outlets commonly frequented by average employees in various cities shows a significant change in prices for similar meals from 2001 to 2012. This brings out the major gap in the defined limit. The items listed here are not to showcase a meal price, but the way the prices for food items have moved between 2001 to 2012. A meal for an employee would compromise of a combination of these dishes on different days.

1Para (iii) of sub-rule 7 of Rule 3: The value of free meals provided by the employer to an employee shall be the amount of expenditure incurred by the employer. The amount so determined shall be reduced by the amount, if any paid or recovered from the employee for such benefit or amenity.Provided that nothing contained in this sub-rules apply to free meals provided by the employer during office hours or business premises or through paid vouchers which are not transferable and usable only at eating joints if the value thereof in each case is upto ̀ 50/- per meal or to tea or snacks provided during office hours or to free meals during working hours provided in a remote area or an offshore installation.1A Food at Work by Christopher Wanjek, ISBN 92-2-117015-2: ILO 2 In India, price data for 435 commodities is tracked. The main problem with WPI calculation is that more than 100 out of the 435 commodities included in the Index have ceased to be important from the consumption point of view. 3 CPI is a statistical time-series measure of a weighted average of prices of a specified set of goods and services purchased by consumers. It is a price index that tracks the prices of a specified basket of consumer goods and services, providing a measure of inflation.

4 http://labourbureau.nic.in/indnum.htm5 http://www.indexmundi.com/commodities/?commodity=food-price-index&months=1206 www.paycheck.in 7To calculate the percentage of meal benefit as a percentage of average annual salary,

meal benefit per meal (`50) x working days in a month (22) x 12 months = ` 13,200, is

used.

5

Domino's - Pizza Ahmedabad 49 100 204%

Pakwan Dinning Hall - Thali Meal Ahmedabad 60 170 283%

Sankalp - Masala Dosa / Idly Vada Ahmedabad 35 95 271%

Chana puri @ Havmor Restaurant -

Chole Bhature

Ahmedabad

35

90

257%

Domino's -

Medium Size

Pizza

Bangalore

65

274

422%

75

342

456%

Shanthi Sagar -

North Indian Thali

Bangalore

34

75

221%

Nandhini South Indian Mini Meals

Bangalore

45

100

222%

Empire -

Non-Veg Thali

Bangalore

-

-

60

134

223%

KFC (Hyson Restaurant) -

Burger

Chennai

85

95

Domino's -

Regular Pizza

Chennai

70

131

187%

Palimar -

South Indian Meal

Chennai

23

77

335%

Anjappar -

Chiken Biryani

Chennai

65

128

197%

Anjappar -

Mutton Biryani

Chennai

70

135

193%

Hotel Saravana Bhavan -

South Indian Meal

Chennai

45

75

167%

Domino's -

Regular Pizza

Delhi

95

137

144%

Bikanervala -

Chole Bhatura

Delhi

38

72

189%

Haldiram -

Thali

Delhi

60

209

348%

Navaidhyam -

Thali

Delhi

53

142

268%

Nirula,s -

Thali

Delhi

68

173

254%

Outlet Name City / Location

VEG % Change

over 2001

NON VEG % Change

over 20012001 2012 2001 2012

2

SURVEY OF FOOD OUTLETS

6

Dominos -Regular Pizza Hyderabad 142 210 148%

Hotel Malligi , Hospet - South Indian Thali Hyderabad 75

Taj Tristar -

Thali

Hyderabad

65

145

223%

Ohris Food Court @Prasad -

Chole Bhature

Hyderabad

125

Mineva Coffe Shop -

South Indian Thali

Hyderabad

65

135

208%

Hotel Central court -

Thali

Hyderabad

84

131

156%

Kamat Restaurant -

Thali

Hyderabad

42

74

176%

Subway -

Regular Sub

Hyderabad

85

Bread World -

Chicken Burger

Kochi

40

70

175%

Domino's -

Regular Pizza

Kochi

45

115

256%

Anugraha -

Thali Meal

Kochi

60

90

150%

Bharat Hotel (BTH) -

Thali Meal

Kochi

50

100

200%

Geethanjali -

Masala Dosa

Thiruvananthapuram

18

27

150%

Diyabati -

Rajasthani Veg Thali

Kolkata

36

66

183%

Arsenal -

Chicken Biriyani/Mutton Biriyani

Kolkata

80

105

131%

Rajdhani Thali -

Thali

Mumbai -

Lower Parel

190

289

152%

Kailash Prabhat -

Chole Bhature

Mumbai -

Lower Parel

45

75

167%

Navratna Restaurant -

Thali

Navi Mumbai -

Vashi

75

130

173%

Ambica Thane -

Dombivali 45

100

222%

Source: Food Outlet Survey

7

Conclusion :

Thus, it may be concluded that the meal benefit needs to be revised immediately to match the increase in food prices. Market prices of a basic meal have increased by over 100%, but meal benefits for Indian employees have not changed in the last 10 years. Government should treat meal benefit limits as a priority reform. The meal limit prescribed should also be linked to the Dearness Allowance or another suitable inflation indicator so that automatic adjustment to the limit happens without the need for any yearly intervention unless the gap widens widely.

Considering that the original limit was set over 10 years ago and there has been an increase of 109.50% in food prices in the past 10 years; the limit should be revised to a minimum of Rs.125 per meal from April 2012.

2 8

Annexure I: The Evolution of the Tax law on Meal Provisions for Employees in

Ph

as

eY

ea

rD

es

cri

pti

on

Tax

ab

ilit

y o

n E

mp

loy

ee

Taxa

bili

ty o

n E

mp

loye

r

Phas

e I

1997

to

2001

mea

l val

uatio

n fo

r

empl

oyee

s on

mea

ls in

side

and

outs

ide

offic

e on

wor

king

day

s

Ta

x Fr

ee u

p to

Rs

35 p

er d

ayFu

lly d

educ

tible

as

an

expe

nse.

How

ever

, no

fisca

l adv

anta

ge fo

r the

com

pany

to s

uppo

rt

empl

oyee

mea

l ben

efit

Phas

e II

2001

to

2005

Firs

t Val

uatio

n of

Perq

uisi

tes

Tax

Free

upt

o R

s 50

per

mea

l

Fully

ded

uctib

le a

s an

expe

nse.

How

ever

, no

fisca

l adv

anta

ge fo

r the

com

pany

to s

uppo

rt

empl

oyee

mea

l ben

efit

Phas

e III

2005

to

2009

Frin

ge B

enef

it Ta

x

Tax

Free

with

no

limits

def

ined

. In

2009

a p

rovi

sion

for e

lect

roni

c m

eal

card

pre

scrib

ed li

mits

of R

s 10

0/ p

er

day,

and

that

bec

ame

a de

fact

o

stan

dard

for m

eal l

imit

Fully

ded

uctib

le e

xpen

se

and

exem

ptio

n fro

m p

ayin

g

FBT.

How

ever

, no

fisca

l

adva

ntag

e fo

r the

com

pany

to s

uppo

rt em

ploy

ee m

eal

bene

fit

Phas

e IV

2009

to

2011

Seco

nd V

alua

tion

of

Perq

uisi

tes

Tax

Free

up

to R

s 50

per

mea

l

Fully

ded

uctib

le a

s an

expe

nse.

How

ever

, no

fisca

l adv

anta

ge fo

r the

com

pany

to s

uppo

rt

empl

oyee

mea

l ben

efit

9

Annexure II: Consumer Price Index (CPI)

Index Number Base Year

All India General Index

October 2011

November 2011

Consumer Price Index Numbers (CPI)

2001 = 100

198 199

Source: http://labourbureau.nic.in/indnum.htm

Annexure III: Commodity Food Price Index

Month Price Change

Jan-02 78.11 1.30%

Feb-02

77.47

-0.82%

Mar-02

78.74

1.64%

Apr-02

78.1

-0.81%

May-02

80.21

2.70%

Jun-02

82.44

2.78%

Jul-02

86.08

4.42%

Aug-02 86.62 0.63%

Sep-02 88.57 2.25%

Oct-02 88.52 -0.06%

Nov-02 87.21 -1.48%

Dec-02 87.89 0.78%

Jan-03 88.24 0.40%

Feb-03 87.6 -0.73%

Mar-03 86.75 -0.97%

Apr-03 86.44 -0.36%

May-03 88.36 2.22%

Jun-03 86.27 -2.37%

2 10

Jul-03 83.41 -3.32%

Aug-03 84.53 1.34%

Sep-03 88.23 4.38%

Oct-03 92.96 5.36%

Nov-03 94.75 1.93%

Dec-03 95.12 0.39%

Jan-04 98.74 3.81%

Feb-04 101.71 3.01%

Mar-04 107.49 5.68%

Apr-04 109.09 1.49%

May-04 109.52 0.39%

Jun-04 105.56 -3.62%

Jul-04 102.6 -2.80%

Aug-04 98.1 -4.39%

Sep-04 96.15 -1.99%

Oct-04 93.3 -2.96%

Nov-04 93.9 0.64%

Dec-04 95.23 1.42%

Jan-05 95.58 0.37%

Feb-05 98.79 3.36%

Mar-05 103.17 4.43%

Apr-05 100.48 -2.61%

May-05 100.91 0.43%

Jun-05 100.96 0.05%

Jul-05 101.43 0.47%

Aug-05 100.09 -1.32%

Sep-05 100.03 -0.06%

Oct-05 100.35 0.32%

Nov-05 97.8 -2.54%

Dec-05 100.42 2.68%

Jan-06 101.37 0.95%

Feb-06 104.35 2.94%

Mar-06 105.56 1.16%

Apr-06 108.05 2.36%

11

May-06

115.1

6.52%

Jun-06

115.82

0.63%

Jul-06

114.84

-0.85%

Aug-06

112.6

-1.95%

Sep-06

108.37

-3.76%

Oct-06

110.8

2.24%

Nov-06

114.25

3.11%

Dec-06

114.84

0.52%

Jan-07

115.05

0.18%

Feb-07

118.99

3.42%

Mar-07

118.77

-0.18%

Apr-07

118.3

-0.40%

May-07

119.54

1.05%

Jun-07

124.62

4.25%

Jul-07

126.26

1.32%

Aug-07

128.65

1.89%

Sep-07

135.05

4.97%

Oct-07

137.23

1.61%

Nov-07

139.3

1.51%

Dec-07

145.97

4.79%

Jan-08

153.02

4.83%

Feb-08

165.52

8.17%

Mar-08

172.53

4.24%

Apr-08

171.57

-0.56%

May-08

173.17

0.93%

Jun-08

179.71

3.78%

Jul-08

178.29

-0.79%

Aug-08

164.85

-7.54%

Sep-08

153.98

-6.59%

Oct-08 129.83 -15.68%

2 12

Nov-08

122.41

-5.72% Dec-08

119.6

-2.30%

Jan-09

127.89

6.93%

Feb-09

124.61

-2.56%

Mar-09 125.85 1.00% Apr-09 131.88 4.79%

May-09 141.87 7.58%

Jun-09

143.18

0.92%

Jul-09

137.11

-4.24%

Aug-09

135.4

-1.25%

Sep-09

131.21

-3.09%

Oct-09

132.35

0.87%

Nov-09

137.12

3.60%

Dec-09

139.52

1.75%

Jan-10

138.74

-0.56%

Feb-10

138.12

-0.45%

Mar-10

139.24

0.81%

Apr-10

143.07

2.75%

May-10

140.65

-1.69%

Jun-10

136.49

-2.96%

Jul-10

143.88

5.41%

Aug-10

151.36

5.20%

Sep-10

156.14

3.16%

Oct-10

163.18

4.51%

Nov-10

164.96

1.09%

Dec-10

176.43

6.95%

Jan-11

183.16

3.81%

Feb-11

189.34

3.37%

Mar-11

184.34

-2.64%

Apr-11

190.88

3.55%

May-11 187.01 -2.03%

13

Jun-11

181.62

-2.88% Jul-11

180.3

-0.73% Aug-11

181.74

0.80%

Sep-11

175.3

-3.54%

Oct-11

165.52

-5.58%

Nov-11 164.18 -0.81% Dec-11 161.55 -1.60%

Jan-12 163.64 1.29%

Source: http://www.indexmundi.com/commodities/?commodity=food-price-index&months=120

Annexure IV: Average Annual Salary and Percentage of Meal Coupon Benefit of Annual Salary

Year

Annual salary Median

Percentage of Meal coupon benefit of annual salary

2006

208492.38 6.33

2007

517598.14

2.55 2008

620337.12

2.12 2009

504387.94

2.61 2010

516451.23

2.55 2011

550539.48

2.39

Source: www.paycheck.in

Annexure V: Average Annual Salary of Information and Communication

Industry and Percentage of Meal Benefit of Annual Salary

Year

Average Annual Salary -

Median

2006

2007

2008

2009

2010 2011Information and Communication Industry

501385.75

366546.59

792609.79

691732.20

755541.20 780600.54

Percentage of Meal benefit of annual salary 2.63 3.60 1.66 1.90 1.74 1.69

2

Source: www.paycheck.in

14

15

www.myfullmeal.org

Karthik Shekharkarthik.shekhar@unitespro.org

9341210784www.unitespro.org

Desig

n: H

imm

at S

ingh

(hm

tsin

gh@

gmai

l.com

), Pr

inte

r: 4t

h Di

men

sion,

New

Del

hi-7

4. www.myfullmeal.org