Job-hoppers may have to pay GST for not serving the notice period, according to Advance Authority of Advance Ruling (AAR).
Central Board of Indirect Taxes and Customs’ AAR pointed out, according to media reports, that a company is “providing a service” to an employee in the case of notice pay, and that’s why GST should be applied on such transactions.
The order stated that GST can be levied on various recoveries from the employee for not serving the notice period, such as pay during notice, group insurance, telephone bills, etc.
The AAR’s latest ruling comes at a time when many companies are facing high attrition rates, as employees switch jobs in the hopes of better pay and benefits.
Also read: Jewellers ignore mandatory gold hallmark licence
The AAR ruling came in the case of Bharat Oman Refineries, which is a subsidiary of state-owned Bharat Petroleum. A similar order was passed by the Gujarat Authority of Advanced Ruling in July 2020, in which the GST authority had ruled that the applicant is “liable to pay GST on recovery of notice pay” from the employees leaving the company without completing the notice period as specified in the appointment letter issued as per the contract entered between the employer and the employee, a Business Today report said.
SEBI-registered tax and investment expert Jitendra Solanki was quoted as saying in a Mint report that “employer can charge 18 per cent GST on the total recoveries accruing on the employee leaving the organisation without serving the notice period”.