Quitting without serving notice period? You may have to pay GST on salary

Employees liable to pay GST on salaries received in lieu of notice period, says an Advance Authority of Advance ruling

As companies are witnessing high attrition rates, an Advance Authority of Advance ruling states that GST can be levied on an employee for not serving the notice period, a financial daily reported.

"The ruling in the case of Bharat Oman Refineries is set to result in scrutiny by the tax department in the coming months as there's already confusion over the issue," stated the financial daily.

The ruling comes at a time when Covid pandemic made employees with high skillsets scarce, thus leading to such employees switching firms for a better package and benefits.

A recent ruling in the case of Bharat Oman Refineries, which is a subsidiary of state-owned Bharat Petroleum, said the GST will be applicable on different employees' recoveries.

These include telephone bills paid by companies, group insurance of the company employees, and payment of salaries in lieu of the notice period, The Economic Times reported. As per the definition of GST, the government charges a specific tax on any activity viewed as "supply of service". These services can either be direct or indirect.