Goods and Services Tax : Job hoppers 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. 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. 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 for not serving the notice period.
Speaking on the GST levied on the employee for not serving the notice period, Mumbai-based 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 hopper to pay the GST as the employee is not serving the notice period.”
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Elaborating upon the GST charges on one’s notice pay; SEBI registered tax and investment expert Jitendra Solanki said, “The recoveries from the employee during notice period include bills like group insurance, mobile bill, etc. In fact, it can be on the entire salary of the employee during the notice pay as well. The employer can charge 18 per cent GST on the total recoveries accruing on the employee leaving the organisation without serving the notice period.”
The SEBI registered expert went on to add 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. He also said that notice period is mentioned in the offer letter and it ranges from one month to even 3 months. 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.