AAR ruling says GST will be applicable on different employees’ recoveries, including telephone bills, group insurance and salary paid during notice period.
The ruling says if an employee is resigning from a company, and he or she serves the notice period, it’s the company that is providing services to the employee.
Amid a talent war among companies, the issue of high attrition rate has taken centre stage in the corporate world. However, another crucial point of debate among tax officials and companies is the tax treatment on salaries of employees serving the customary notice period.
A recent ruling in the case of Bharat Oman Refineries, which is a subsidiary of state-owned Bharat Petroleum, by the Central Board of Indirect Taxes and Customs’ Authority of Advance Ruling (AAR) 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 on serving 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.