The Authority of Advance Ruling (AAR) at GST has said in its recent ruling that GST can be levied on various recoveries from the employee for not serving the notice period.
Accordingly, employees quitting job may have to pay Goods and Services Tax (GST) if they don’t serve the notice period mentioned in their offer letter at the time of recruitment. These recoveries include pay during notice, group insurance, telephone bill, etc. In short, an employee will be liable to pay GST on its monthly salary.
In this regard, tax and investment expert Balwant Jain said, “As per recent ruling of AAR, it is responsibility of the recruiters to pay GST through reverse charge mechanism on the recoveries from the employee during notice period. As recruiters are in dictating terms, they can ask the job seekers to pay the GST as the employee is not serving the notice period.”
SEBI registered tax and investment expert Jitendra Solanki said that 18 per cent GST can be levied only when the employee has not served the notice period. Otherwise, it’s employer who will pay the GST on the monthly salary of the employee. So, an employee is advised to not just look at the salary break up while accepting the offer of its new recruiter but notice period as well.