Levy of GST— In the instant case, the appellant filed an application for advance ruling before the Gujarat Authority for Advance Ruling, wherein it submitted that it enters into contract with the employees at the time of appointing any employee at their factory, by issuing ‘Appointment Letter’. 

It raised the following question for advance ruling -

“Whether the applicant is liable to pay GST on 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 Employer and the Employee?”

The GAAR examined the aforesaid question answered in affirmative i.e. it held that the appellant is liable to pay GST on recovery of notice pay from the employees.

Held that – In the instant case, the act of notice pay recovery by the applicant from his employee isn’t covered in Para 5(e) of Schedule II of CGST Act, 2017. In case of M/s Bharat Oman Refineries Ltd. it was held that GST is not applicable on payment of notice by an employee to the employer in lieu of notice period. Appeal of the petitioner is allowed.