GST News: If an employee leaves his job without completing the notice period, then he will have to pay 18 per cent GST on the full notice payment
GST News: Companies are currently hiring to work on new projects. In the rush to fill the vacant posts, companies are hiring new employees even before the notice period is over. If you are among such employees and are leaving your current job without the required notice period, be prepared to pay 18% GST on the entire notice paid.
According to a report in the Economic Times, in line with a recent decision by the Central Indirect Taxes and Customs Authority (AAR) in the case of Bharat Oman Refineries, a subsidiary of state-owned Bharat Petroleum, Accordingly, Goods and Services Tax will be applicable on various employees.
These include telephone bills paid by companies, group insurance of company employees and payment of salary in lieu of notice period.
As per the above judgment, in case of notice payment, the company is actually ‘providing a service’ to an employee and hence GST should be levied on the same. Under the GST framework, any activity that is treated as a supply of service is taxed.
Know what experts say In
this context, Mumbai-based tax and investment expert Balwant Jain said, ‘When an employee agrees to pay his employer for not serving the notice period, it is treated as a service. and is liable to pay 18 per cent GST on the amount.
Since the employees are not registered GST payers, it is the responsibility of the employer to pay GST through reverse charge mechanism on recovery from the employee.
