Is GST Charged on Employee Notice Recovery? Seeking Clause Details for Clarity

Good afternoon to all, I am writing to request your assistance regarding the recovery of the employee notice period issue related to GST. I would like to inquire whether GST is applicable on the notice recovery amount. If applicable, could you kindly provide the relevant clause for reference? Thank you for your attention to this matter.

Thanks & Regards,
Koteswara Rao

Hi, Recovery of notice pay from dues of an employee or payment of notice pay by the employee who could not serve the notice period as per the contractual agreement or appointment letter does not amount to supply. Therefore, as per Section 7(1A) of the CGST Act, 2017, the provisions of Schedule II do not come into play. Furthermore, relying on the reasoning and decision given by the MPAAAR as mentioned above and the decision of the Honorable Madras High Court in W.P. Nos. 35728 to 35734 of 2016 in the case of GE T&D India Ltd Vs Deputy Commissioner of Central Excise, LTU, Chennai – 2020-VIL-39-MAD-ST, we hold that the notice pay recovered by the applicant from its employees is not liable to GST.

Source: https://www.taxguru.in