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Employee to pay 18% GST on notice period pay if leaves in between

Jan.14,2021: Now employee will have to pay 18 percent GST also on the amount of notice pay recovered by employer if he chooses to leave the job without completing the notice period with the company according to report published in MONEY CONTROL.

The Gujarat Authority of Advance Ruling has held that an employee exiting a company without completing their notice period would be liable to pay 18 percent GST on recovery of the pay.

The Authority was hearing a case where an employee of Ahmedabad-based export company Amneal Pharmaceuticals sought advance ruling on the issue of exit from their job without serving the three month notice period.

“We hold that the applicant is liable to pay GST at 18 percent under the entry of services not elsewhere classified, on recovery of notice pay from the employees who are leaving the company without completing the notice period as specified in the appointment letter issued as per the contract entered between them,” the authority said in an order.

Terming it as “tolerating an act”, the Authority said that recovery of the amount would be in lieu of “breach in serving stipulated notice period.”

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