The Gujrat Authority of Advance Ruling has sent out a statement that if any employee working in a company exits it without serving the given notice period will be accountable for paying 18% GST to recover the loss suffered by the company during the notice period.
“We hold that the applicant is liable to pay GST at 18% under the entry of services not elsewhere classified, on the 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.
The ruling was taken into account regarding an occurrence involving Amneal Pharmaceuticals, a company that is 100 percent EOU, i.e., Export Oriented Unit, which manufactures pharmaceutical products based out of Ahmedabad. An employee that worked for the company had strived for an advance issue on the ruling, where the notice period in question was for three months.
The authority stated that an 18% tax to be levied in case of exit without serving notice, and would be considered as a breach and qualify as “tolerating an act”.
The authority also mentioned that this GST would not be compensated under the exemption provided employer-employee relationship under the GST act.
Source- Economic Times