Gst on notice pay recovery

3333 views 6 replies

siva andhavarapu

ca final

388 Points Joined January 2015

HAI

CAN ANYONE TELL ME WHTHER GST TO BE LEVIED BY EMPLOYER ON EMPLOYEE FOR NOTICE PAY RECOVERY?

PLS REPLY...URGENT.

THE FOLLOWING LINES ARE STATED BY EMPLOYER(FOR GST APPLICABILITY).BUT I DOUBT ABOUT THIS.

“Please note that though the services by an employee to the employer in the course of or in relation to his employment is outside the purview of GST but the transaction of notice pay recovery is not in the nature of services provided by employee to employer in the course of his employment.

Further, note that as per schedule II, clause (e) of CGST Act, “Agreeing to the obligation to refrain from an act, or to refrain from an act, or to tolerate an act or a situation” are to be treated as supply of services.”

Replies (6)

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

210809 Points Joined July 2016

YES....... read carefully the second part ...........

Subodh Kumar Sharma

31 Points Joined July 2017

NP paid to employee out of preview, on detection by employer shall apply to GST

Ravi Kumar Somani

Indirect Taxes Specialization

3893 Points Joined April 2009

Yes, Notice Pay recovery shall be liable for GST as it is not a service provided by employee to employer but it is a reverse case i. e. Service is provided by employer to employee for which consideration is paid by the employer in the form of Notice pay out. This is not covered in schedule 3 as it is not any service provided by employee to employer. It is covered in schedule 2 as an act of toleration which is deemed to be a supply. However, one can always argue the law making and practicality of the situation based on which typical employer employee contracts are laid out.

siva andhavarapu

ca final

388 Points Joined January 2015

Tq for reply. But the notice pay recovery is a transaction araised due to contract between employer and employee..so it is out of purview of gst know.

Subodh Kumar Sharma

31 Points Joined July 2017

it's pruned to litigations...

CA S K MISHRA

Service

4280 Points Joined July 2008

Notice pay recovery is a consideration paid by employee to employer for non-performance of a contract of employment.

This is a taxable service covered under head “Agreeing to tolerate an act” SAC Code 999794- GST 18%.

If in the appointment letter, it is specifically mention that Notice pay shall be recovered with GST, then it will be recovered from employee, otherwise it will be deemed that, GST is inclusive as per Rule 35 of CGST Rules, 2017 and the employer shall bear the GST component.

For conceptual clarity on GST refer following link.

https://www.amazon.in/dp/194832105X

https://www.amazon.in/dp/164249030X