In my notice period recovery, they deducted GST per the offer letter and the exit policy. I have sent a mail stating that GST deduction (other deduction in FnF statement) can not be paid and the rest recovery can be paid - like that I have sent a mail I have not received any reply yet. What next action can be taken from my end to pay recovery without GST please advise.
From India, Chennai
From India, Chennai
HI,
Employment services are exempted from GST. Thus, some professionals are of the view that as notice pay recovery is in the course of employment, the same is also exempt from GST. But, it should be noted that Schedule II of the CGST Act states certain activities that shall be treated as a supply of goods or services.
Such activities include ‘Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation’. To this, there can be a different point of views:
It could be contended that an employee receives the notice period pay for not serving the notice period prescribed by the employer. The action of not serving the notice period leads to tolerating the act of an employer. Thus, GST is applicable to notice pay recovery.
In case the notice pay policy does not contain such agreement for tolerating the act of an employee. Then, such notice pay recoveries are not subject to GST.
This is a long-pending issue and needs clarification from the GST authorities. Taxpayers can make representations to seek clarification, as this is a prevalent issue. There are also a few crucial decisions made in favour of the assessees stating that such notice pay recoveries are not subject to GST:
Thanks
From India, Bangalore
163Employment services are exempted from GST. Thus, some professionals are of the view that as notice pay recovery is in the course of employment, the same is also exempt from GST. But, it should be noted that Schedule II of the CGST Act states certain activities that shall be treated as a supply of goods or services.
Such activities include ‘Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation’. To this, there can be a different point of views:
It could be contended that an employee receives the notice period pay for not serving the notice period prescribed by the employer. The action of not serving the notice period leads to tolerating the act of an employer. Thus, GST is applicable to notice pay recovery.
In case the notice pay policy does not contain such agreement for tolerating the act of an employee. Then, such notice pay recoveries are not subject to GST.
This is a long-pending issue and needs clarification from the GST authorities. Taxpayers can make representations to seek clarification, as this is a prevalent issue. There are also a few crucial decisions made in favour of the assessees stating that such notice pay recoveries are not subject to GST:
Thanks
From India, Bangalore
There are difference of opinion about GST applicability to notice pay. Section 65B (44) of Finance Act, 1994, defines service as "any activity carried out by a person for another for consideration, and includes a declared service, but shall not include:
provision of service by an employee to the employer in the course of or in relation to his employment."
Therefore, the service provided by employee to employer in course of employment is excluded from service tax levy. But when an employee reigns from service, he is expected to serve or remain for a certain period or compensate by paying amount equal to the notice period salary as notice pay. Not remaining for the notice period may cause some obstacles to the employer. This is actually toleration and if by the act of employee not serving notice period, if the employer had to tolerate and for that an amount is recovered, then that recovery of notice pay would be liable for service tax.
In Manappuram Finance Ltd. v. Assistant Commissioner of Central Tax and Excise - [2022] (Kerala) it was held that GST is not applicable to notice pay recoveries. In case of M/s. QX KPO Services Pvt Ltd vide Order in Appeal no. AHM-EXCUS-001-APP0107-17-18 dated 29.09.2017, the Commissioner (Appeals) has held that no service tax is payable on notice pay recovery.
Under any circumstance, the amount of recovery shall not include GST. If the employer has to pay GST on their recovery, they have to pay it from their pockets and they cannot deduct it from the employees.
From India, Kannur
provision of service by an employee to the employer in the course of or in relation to his employment."
Therefore, the service provided by employee to employer in course of employment is excluded from service tax levy. But when an employee reigns from service, he is expected to serve or remain for a certain period or compensate by paying amount equal to the notice period salary as notice pay. Not remaining for the notice period may cause some obstacles to the employer. This is actually toleration and if by the act of employee not serving notice period, if the employer had to tolerate and for that an amount is recovered, then that recovery of notice pay would be liable for service tax.
In Manappuram Finance Ltd. v. Assistant Commissioner of Central Tax and Excise - [2022] (Kerala) it was held that GST is not applicable to notice pay recoveries. In case of M/s. QX KPO Services Pvt Ltd vide Order in Appeal no. AHM-EXCUS-001-APP0107-17-18 dated 29.09.2017, the Commissioner (Appeals) has held that no service tax is payable on notice pay recovery.
Under any circumstance, the amount of recovery shall not include GST. If the employer has to pay GST on their recovery, they have to pay it from their pockets and they cannot deduct it from the employees.
From India, Kannur
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GST ON RECOVERY OF UNSERVICED NOTICE PERIOD.docx
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