Non-compete amount given to outgoing employee may draw GST

Non-compete amount given by an employer to its outgoing employee may attract goods and services tax (GST), even as exact clarity will emerge once rules are cleared by the GST Council on March 31. 

Even now, this amount attracts service tax, explains M S Mani of Deloitte. 

As such, any amount given by an employer which is not part of the contract may attract GST, he said.

He, however, cautioned that GST Bills should not be read in isolation of the rules which are yet to be framed. 

Which items will attract tax will be contingent on these rules and GST Bills, he said. 

The Council has cleared five Bills — those relating to the Centre, states, union territories and inter-state movement of goods and services, besides compensation. While Parliament is debating four of these, state GST Bill will have to be cleared by the respective state assemblies. 

GST given by the employer to various sort of services such as cab service may also not get input credit or reimbursement of these taxes. 

However, if the company provides a car to employee, it is highly debatable whether this would come under GST as these are part of direct taxes, say an expert. End