GST on Notice Period Recovery
The Gujarat Authority for Advance Rulings (GAAR) has ruled that an employee leaving a company without fulfilling their notice period could be subject to an 18 percent Goods and Services Tax (GST) on the recovery of their pay. This ruling arose from a case involving Amneal Pharmaceuticals, an export company based in Ahmedabad, seeking clarification on the consequences of departing without serving the mandated three-month notice period. While industry experts acknowledge that notice pay is not GST exempt, the application of this tax may vary depending on the specific employment terms and interpretations by tax authorities.
Interpretation of GST Law
MS Mani, Senior Director at Deloitte India, highlighted that the GST law does not explicitly outline the applicability of the tax to every transaction due to the vast number of transactions nationwide. The law offers general guidance, and advance ruling authorities interpret it in specific scenarios. In this instance, the interpretation was that since serving the notice period constituted a service, the notice pay would attract GST. It's crucial to note that this ruling pertains to a particular case and may not apply universally to all situations where an employee fails to serve the notice period.
Therefore, while GST may be applicable, the decision on whether to levy the tax would depend on the terms outlined in the employment contract and the policies set by individual companies.
https://www.moneycontrol.com/news/bu...o-6341931.html
From India, Pune
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3180The Gujarat Authority for Advance Rulings (GAAR) has ruled that an employee leaving a company without fulfilling their notice period could be subject to an 18 percent Goods and Services Tax (GST) on the recovery of their pay. This ruling arose from a case involving Amneal Pharmaceuticals, an export company based in Ahmedabad, seeking clarification on the consequences of departing without serving the mandated three-month notice period. While industry experts acknowledge that notice pay is not GST exempt, the application of this tax may vary depending on the specific employment terms and interpretations by tax authorities.
Interpretation of GST Law
MS Mani, Senior Director at Deloitte India, highlighted that the GST law does not explicitly outline the applicability of the tax to every transaction due to the vast number of transactions nationwide. The law offers general guidance, and advance ruling authorities interpret it in specific scenarios. In this instance, the interpretation was that since serving the notice period constituted a service, the notice pay would attract GST. It's crucial to note that this ruling pertains to a particular case and may not apply universally to all situations where an employee fails to serve the notice period.
Therefore, while GST may be applicable, the decision on whether to levy the tax would depend on the terms outlined in the employment contract and the policies set by individual companies.
https://www.moneycontrol.com/news/bu...o-6341931.html
From India, Pune
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GST ON RECOVERY OF UNSERVICED NOTICE PERIOD.docx