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Employee Quitting Firm Without Serving Notice Period To Pay 18% GST on Notice Pay

Employee Quitting Firm Without Serving Notice Period To Pay 18% GST on Notice Pay

In a recent ruling held by The Gujarat Authority of Advance Ruling said that if an employee quits work without serving the notice period of three months then they may have to pay 18 per cent of GST on notice pay.

 

While a case hearing of employee Vs the employer (an ahmedabad-based export company called Amneal Pharmaceuticals). The employee was seeking an advance ruling on their exit from the job without serving the mandatory three months of the notice period.

 

The authority held that the applicant was liable to pay GST at 18 per cent under the entry of services not elsewhere classified, on the recovery of notice pay from the employees leaving the firm without the completion of the notice period as given in the appointment letter issued according to the contract entered between the employee and the employer. They termed it as “tolerating an act”,  and added that the recovery of the amount would be in lieu of “breach in serving stipulated notice period.”

 

Furthermore, the amount will not be covered under employee exemptions as per the GST Act, it added.

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