Partner - Risk Management
Training Operations - Csr
Practicing Chartered Accountant
Tax Consultant
Recruitment/talent Acquisition, Career Counselling
Raj Kumar Hansdah
Shrm, Od, Hrd, Pms
Loginmiraclelogistics & Management) Pg
Start Up Consultant
+5 Others

PRIME SPONSOR - FACTOHR - Customised Payroll, GPS Enabled Attendance, Travel, Performance Management, HRMS. Explore Features
Is notice pay recovery from a resigned employee liable for service tax? & also recovered from the resigned employee? If any one having notification / circular in this regard, please share.........
Cite.Co is a repository of information created by your industry peers and experienced seniors sharing their experience and insights.
Join Us and help by adding your inputs. Contributions From Other Members Follow Below...
Notice Pay recovery is not a service tax related subject. Not applicable. Pon
Is there any specific notice in act or law ? pls update the same.
It is not in the service tax rules
(Note there is no service tax act)
So there is nothing to quote.
Notice pay is not a service, it is a part of salary (negative salary if you wish)
How can there be service tax on it ?

Dear friends,
How U got this idea to apply ST from an (ex-employee), funny though. There is no notification of ST with regard to salary payment. You don't extend any service, do U mean to say recovery/paying the Notice Pay to the (ex)-employee a Service ? Good idea, send this suggestion to Mr.P.C. I'm sure he would reward you for such a suggestion which would fetch the exchequer 12.36% on every body's salary as this would amount to a single largest contributor to the govt's kitty. (don't get offended, just for fun).
Dear friends,

We, HR group, are using this forum for knowledge sharing / message gathering. If anyone ‘post’ anything in this forum means, there is some information required and expecting help from knowledgeable persons and I hope no one is playing ‘funny games’ here (Loginmiraclelogistics please note and don’t comment unnecessarily in the “public forum” if you don’t know anything & don’t be act smart)

Additionally would like to inform you that in July 2012, there was some amendment in Service Tax rules and come to know that “some employers” started deduct service tax @ 12.36% on notice pay period payment (shortfall of notice period) from the resigned employee. The reason behind is, when employee submitted his resignation, the service agreement between both of them (employee and employer) has come to an end and employer is giving service to resigned employee for the remaining notice period. However, some dilemma in the service tax amendment and hence not followed by all the employers (employers are justifying with their own interpretation).

In case, any of you come across this situation or having the service tax amendment copy, please share, which may be useful to other members.
Notice period salary is recoverd while the person is in employment and there is no service or contract and hence service tax is not applicable. The deduction is as per the terms and contract mentioned inthe offer letter and it has to be done as per that
I do not know who is this employer who has been deducting service tax on notice pay recovery. However, in spite of doing so much work in service tax, I have not heard such a thing before. Whoever has taken this interpretation obviously has no knowledge of service tax. He should refer to his CA for help.
The only case where service tax is applicable in reference to employee services is for SERVICES RENDERED TO EMPLOYEES, which covers amounts deducted for Canteen services, club facilities and the like.
There is no service tax on any payment made by employer to employee or for deductions made therefrom except where it is to pay for services that are already in the list of services covered in service tax. (Eg food / catering services is covered under service tax, so deduction from salary for catering services in factories requires payment of service tax on the same to be paid).
In fact I find loginmericaklogistics comment appropriate in this context.

Hi, I have been charged with the service tax on my notice pay recovery. please let me know where can i appeal against this.
Hello Guru_home,
While I am sure Loginmiraclelogistics NEVER had any intention of poking fun @ you OR the topic you raised, pl also try to take humour in your stride.
Can you pl post the relevant portion of the Rules that you referred to ['............inform you that in July 2012, there was some amendment in Service Tax rules..']? This will enable the members to get clearly as to what you are referring to.
Prima facie, like Saswatabanerjee mentioned, this doesn't make any logical sense. But knowing how our Governments operate, there's always a chance of such things getting into Policies.
Another possibility COULD be that the Rules MAY be saying something & the Companies MAY be INTERPRETING in the wrong way [happens quite often].
I don't quite understand what you mentioned--".......when employee submitted his resignation, the service agreement between both of them (employee and employer) has come to an end and employer is giving service to resigned employee for the remaining notice period......".
I find 2 points that need elaboration by the legal members:
1] The Agreement you are referring to is an Employment & NOT Service Agreement.
2] The Resignation letter is ONLY an Expression of Intent of ending the Agreement. The Actual End comes once the Relieving letter is issued.
PRIME SPONSOR - TALENTEDGE "Interactive Anywhere Learning". Executive courses from top reputed institutes like IIM, XLRI, MICA. View Courses

Add Reply Start A New Discussion

About Us Advertise Contact Us
Privacy Policy Disclaimer Terms Of Service

All rights reserved @ 2019 Cite.Co™