Want to quit job without serving notice period? You may have to pay GST

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Benefigo Team | Jan 15, 2022, 02:05 am IST


Job-hoppers may have to pay GST if they do not serve the notice period (AAR), according to the Advance Authority of Advance Ruling, 

Media sources stated that the AAR of the Central Board of Indirect Taxes and Customs noted that in the case of notice pay, a company is "providing a service" to an employee, which is why GST should be charged. The AAR further stated that tax is charged on activity recognised as a supply of service under the GST framework. According to the research, service delivery could be direct or indirect.

According to the judgement, GST can be assessed on a variety of recoveries from the employee for failing to serve the notice term, including salary during the notice period, group insurance, telephone bills, etc.

The AAR's newest decision comes when many businesses are experiencing high turnover rates as employees leave for better compensation and benefits.

Bharat Oman Refineries, a subsidiary of state-owned Bharat Petroleum, was the subject of the AAR judgement. A Business Today report mentioned that the Gujarat Authority of Advanced Ruling issued a similar order in July 2020. It ruled that the applicant is "liable to pay GST on notice pay recovery" from employees who leave the company without completing the notice period specified in the appointment letter issued as per the contract entered between the employer and the employee.

"Employer can impose 18% GST on the total recoveries accruing on the employee quitting the organisation without serving the notice period," SEBI-registered tax and investment expert Jitendra Solanki was cited as saying in a Mint storey.