Unfair recovery of Notice period bought out amount by my employer

891 votes

The notice period does not attract any GST. You can try to negotiate with employer to avoid paying the shortfall of notice period by extending the notice period Or for earlier release from the project. you may issue legal notice to the employer asking for the reason that you would have to pay GST for the shortfall of notice period.

LawRato LawRato

772 votes

Under the GST regime, tax is on the supply of goods or services. Supply between two distinct persons is subject to GST. The tax liability on services between an employer and employee has been debated right from the erstwhile negative regime of Service Tax. Under GST, Section 7 of the CGST Act, 2017 discusses about ‘supply’. The relevant portion is extracted herein below: 7. (1) For the purposes of this Act, the expression “supply” includes–– (a) ……. ; (b) ……. ; (c) …….. ; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. Further, Schedule II contains the activities that are to be treated as supply of goods or supply of services. As per this Schedule, clause 5 is of relevance in the present case and is reproduced hereunder: 1. 2. 3. 4. 5. Supply of services The following shall be treated as supply of services, namely:- (e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and A conjoint reading of the above provisions leads to an understanding that the activities specifically mentioned in Schedule II to CGST Act, 2017 are to be treated as goods or services. And as per clause (e) of the Schedule, agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act has been specifically stated to be treated as a service in this Schedule. It could be argued that ‘notice period pay’ is the consideration received by employer for tolerating the act of employee who does not serve the notice period. Now, the services by an employee to employer in course of or in relation to employment would not be treated as either supply of goods or as services. However, nowhere does the law exempt the services by employer to employee. Hence in your case, in my view, GST is liable to be paid.

Advocate Ashok A. Deshpande LawRato