Notice Pay Recovery under GSTCMA. Sudha Rani V.

SUBSCRIBE FOR FULL CONTENT


The Tax Publishers GST--Recovery Notice Pay Recovery under GST CMA. Sudha Rani V. An interesting question is whether Fines and Penalties levied on Employees by Employer as a consequence breach of contract are leviable under GST. The Learned Author discusses this question and is of the view that such fines and penalties are out of scope of supply under GST and thus not leviable under GST. 1. Introduction An employee gives prior notice to the employer before he/she leaves the organisation if specific clause is stated in the employment agreement to give prior notice. This period is called notice period. However, if employee wishes to leave without serving notice period, then he have to pays certain amount to employer as agreed in the employment agreement. This could be 1 to 3 months' salary as agreed. In few cases, employer deducts salary for the tenure of notice period not served as compensation for breach of the terms of the employment agreement by employees. Whether amount paid in lieu of serving notice period falls under scope of supply and falls under entry 5(e) viz: agreeing to the obligation to tolerate an act or a situation of schedule II of CGST Act, is discussed in this article. Entries in Schedule II of CGST Act, 2017 contains the list of activities which either regarded as supply of goods or supply of services. These activities or transactions are said to be supply under GST, only when it constitutes a supply in accordance with the provisions of section 7(1) of CGST Act. The said entry 5(e) of schedule II following three activities: (i) Agreeing to the obligation to refrain from an act. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

GST--Recovery

Notice Pay Recovery under GST

CMA. Sudha Rani V.

An interesting question is whether Fines and Penalties levied on Employees by Employer as a consequence breach of contract are leviable under GST. The Learned Author discusses this question and is of the view that such fines and penalties are out of scope of supply under GST and thus not leviable under GST.

1. Introduction

An employee gives prior notice to the employer before he/she leaves the organisation if specific clause is stated in the employment agreement to give prior notice. This period is called notice period.

However, if employee wishes to leave without serving notice period, then he have to pays certain amount to employer as agreed in the employment agreement. This could be 1 to 3 months' salary as agreed. In few cases, employer deducts salary for the tenure of notice period not served as compensation for breach of the terms of the employment agreement by employees.

Whether amount paid in lieu of serving notice period falls under scope of supply and falls under entry 5(e) viz: agreeing to the obligation to tolerate an act or a situation of schedule II of CGST Act, is discussed in this article.

Entries in Schedule II of CGST Act, 2017 contains the list of activities which either regarded as supply of goods or supply of services. These activities or transactions are said to be supply under GST, only when it constitutes a supply in accordance with the provisions of section 7(1) of CGST Act.

The said entry 5(e) of schedule II following three activities:

(i) Agreeing to the obligation to refrain from an act.