The Punjab Authority of Advance Ruling (AAR) has held that the GST is not payable on notice pay recovered from outgoing employees. The CBIC issued a circular dated August 3, 2022, clarifying that the charges paid by an employee when he or she leaves without serving the mandatory notice is not taxable. A few crucial decisions made in favour of the assessees stating that such notice pay recoveries are not subject to GST:
Order of Commissioner (Appeals) in case of M/s.Gujarat State Fertilisers & Chemical Ltd – It held that cessation of employment is treated as employment service not liable for the GST.
Allahabad CESTAT in case of M/s. HCL Learning Systems Vs CCE, Noida – It held that the amount recovered out of salary already paid is not subject to GST.
