Gst on notice pay recovery

3755 views 5 replies

CA Chaitrali

CA Job

31 Points Joined August 2015

Dear Experts,

Please guide me on the below situation.

Our company policy says that there will be 3 month notice period that any employee will need to serve. The employees have few Earned Leave(EL) balances to their credit. The employees often opt to utilise the EL balances to cut short the notice period.

In the Full and Final working, (e.g) we show as follows

No. of notice days not served - 30 days; No. of EL available - 36 days
EL payable (EL - notice period) = 6 days.

In this case, do we still need to recover and pay GST? If yes, is it at 18% or any other rate. What will be the SAC code that will be shown?

Replies (5)

RAJA P M

"Do the Right Thing...!!!"

128121 Points Joined January 2015

As per me GST not applicable in that transactions. Bcoz, It's not a supply of Services...

But, Some experts says GST applicable in this...

Wait and we get some explanation...

Rakesh Sarswath

Article Student-GST Specialization

190 Points Joined January 2016

Notice pay recovery by the employer shall be considered as a supply of services as it falls under the entry of "agreeing to the obligation to refrain from an Act or situation or to do an Act" specified under schedule II.

Further in your case employer has received the consideration by way of reducing the EL available to the employee. Further, consideration, as defined under section 2(31) of CGST says consideration means any payment made with regards to supply whether in money or otherwise hence non-monetary consideration is also included.

Thus in my view, GST shall be applicable.

Kumar Gaurav

Paid assistant

107 Points Joined March 2009

GST is payable on the same. Based on employee permanent address on company record of GST payable to be decided

surya

student

3 Points Joined February 2018

Is GST applicable for the notice period amount for the Resignation made in Dec 2016? The employer send the notice amount payment request only recently in Feb 2018 and is asking to pay 18% GST on the same! Is this correct?

sushil ranjan

student

33 Points Joined October 2015

AS per Schedule III of the Central GST Act, 2017, services by an employee to the employer in the course of or in relation to his employment will not be treated as supply of goods or services. Thus, the salaries and other allowances that are paid by the employer to the employee, as part of the employment contract are outside the purview of GST. cont....