{"id":3109,"date":"2019-12-13T13:01:26","date_gmt":"2019-12-13T07:31:26","guid":{"rendered":"https:\/\/aktassociates.com\/blog\/?p=3109"},"modified":"2019-12-13T13:01:51","modified_gmt":"2019-12-13T07:31:51","slug":"gst-notice-pay-recoveries","status":"publish","type":"post","link":"https:\/\/aktassociates.com\/blog\/gst-notice-pay-recoveries\/","title":{"rendered":"GST Taxability In Case Of Notice Pay Recoveries"},"content":{"rendered":"

It is seen that under GST law, there are some issues that are related to the applicability of GST on the payment to the employee like employee notice period recovery, compensatory damages, which need clarity for taxation. Although many private organizations make a contract with the employee by which, employees shall have to legally serve the office for a specified period which could be varied from 15 days to 3 months or more depending on the designation or role of a particular employee during the termination of employment contract in the organization. If any employee who fails to serve the notice period, then the security amount which has been collected at the time of appointment or amount which could be part of the salary, would be withheld by such organization as \u2018Notice<\/a> period pay\u2019. Now, the question arises that whether such withheld amount which becomes the income of the organization, shall fall in the ambit of GST Although GST has replaced the earlier law, the treatment of GST on notice pay recovery shall continue.<\/span><\/p>\n

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There are certain activities that have been specifically mentioned in Schedule II to <\/span>CGST<\/a> Act 2017 and it provides whether the supply shall be treated as goods or services. One of the points in the schedule states that the agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act shall be treated a service. Based on a general reading of the point, it could be understood that notice period pay is the consideration received by an employer for tolerating the act of an employee who does not serve the notice period and hence GST shall be levied.<\/span><\/p>\n

Fun fact that UK VAT law is very close to our new GST law<\/a> in which tax does not levy on termination of a contract subject to certain conditions. Our GST law does not provide for such exemption hence this may not be applicable in India.<\/span><\/p>\n

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In this article, we will discuss about...<\/p>\nToggle<\/span><\/path><\/svg><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n