This Tax Alert gives an update on the decision1 of the Supreme Court regarding the levy of Octroi or Local Body tax (LBT) on meal vouchers provided by the appellant to its customers who in turn provide the said vouchers to their employees.
This issue had been dealt with by the Bombay High Court wherein it held that meal vouchers qualify as ‘goods’ and therefore, are leviable to Octroi or Local Body tax.
However the Supreme Court overturned the decision of the Bombay High Court by opining that meal vouchers are not ‘sold’ by the appellant. It observed that the intrinsic and essential character of the transaction undertaken by the appellant is to provide service. The services are provided by means of meal vouchers.
The Supreme Court mentioned that the appropriate test to determine whether the meal vouchers can be treated as ‘goods’ or not, is to determine whether such meal vouchers can be traded and sold separately. Since the vouchers cannot be traded and sold separately, they cannot be termed as ‘goods’ and thus, are not liable to Octroi or Local Body tax.
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