Service Tax Applicibility On Full & Final Amount

Dear All,

Two days ago, one of our service tax consultants informed us that service tax will be applicable on the full and final amount of employees. It is the employer's responsibility to submit the service tax on the full and final amount.

Please advise me on the above-mentioned matter.

With Thanks and Regards,
Ankur

As per the amended service tax negative list, the relationship between the employer and employee ends after the resignation of the employee. Now, the employer works as a service provider to the ex-employee. In this case, the relationship between the employer and employee will be that of a service provider and service receiver. Therefore, service tax is applicable on the full and final amount.

If you are conducting the Full & Final Settlement of the employee for the services rendered by him before his resignation and relieving, then Service Tax is not applicable. However, if the employee is working as an independent consultant/service provider, then service tax is payable by the employee if he comes under the service tax limits. If you need a proper opinion/advice on the matter, our legal team would be pleased to help you.

Thanks,

Kind Regards,

Avika Kapoor
Vice President - Operations
Mobile: 7503110330
Website: [Kapgrow](http://www.kapgrow.com)

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Dear Avika,

Your concern is right, but it only applies to outsourced service providers. Here, I am referring to employees who are on the company's payroll and decide to resign from their current position. In such cases, the company will provide the employee with their full and final amount after they have resigned.

Dear Ankur,

Regarding the final settlement to the employee, it is not applicable. I believe the final settlement being referred to here includes PF/Gratuity, leave encashment, bonus, etc., correct? In that case, your consultant is mistaken. There is no "service provider" and "service receiver" relationship between the employer and the employee. Consultancy is a separate matter.

Best regards,
Kumar S.

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