Recently the AAAR again held the decision on the fact GST not applicable on notice payment and allowed canteen services ITC. The judgement of the AAAR Madhya Pradesh has been done in the regarding of M/S. Bharat Oman Refineries Limited [Advance Ruling No. MP/AAAR/07/2021 dated November 8, 2021]. The reversed fact is done on multiple facts including:
- Employee Notice pay by the employer in lieu of notice period
- Telephone charges
- Group Medical Insurance Policy (“the Policy”) recovered from employees and providing
- Employees Canteen facility free of cost
Also, the ITC is said to be available when the conclusion is that the GST is not applicable and the canteen services can be favoured to be as a major service in general.
Past Rule by MP AAR
In between the comparisons among various companies the problem of exceeding the rate has become the centre in the corporate people. But the tax council and firms oppose each other on the tax modifications upon salaries of the employees providing the customary notice period.
Ruling towards the concern of the Bharat Oman Refineries, a subsidiary of the state-owned Bharat Petroleum through the Central Board of Indirect Taxes and Customs and Customs’ Authority of Advance Ruling (AAR) maintained the GST will be relevant on various employees’ recoveries.
It consists of the telephone bills furnished through the firm’s group insurance of the company employees and the payment of the salaries upon the furnishing of the notice period. Under the GST part, the government imposes a particular tax on any operation which is seen as a supply of service under GST. These services might be direct or indirect.
The ruling specified that if the employee is resigning from the organization and the person is under the notice period then the company furnishes the services to the employee.
“Under the Gujarat Authority of Advanced Ruling in July 2020, the GST council asked that the petitioner is liable to pay GST on the recovery of the notice pay” through employees who stops working in the company and did not finish the notice period as mentioned in the appointment letter provided under the contract entered amid the employer and the employee.
“Amneal Pharmaceuticals Pvt Ltd, Ahmedabad gives the application and passes the order. 18% GST is entitled to furnish through the petitioner beneath the entry of services not elsewhere classified, on recovery of notice pay from the employees who are leaving the company without completing the notice period”.
Read Also: GST Council: Constitution, Functions, Quorum, Decision-making
Council finally decided post to read out the case law of Gujarat State Fertilizers & Chemical Ltd (2016), in which it stood that the end of employment must be recognized as employment service and not entitled to the service tax. It is indeed followed the decision of Allahabad CESTAT towards the concern of HCL Learning Systems Vs CCE, Noida, wherein it has been held (November 2019) that when amounts are recovered out of salary already paid, such amounts would not be subject to service tax as salaries are not subject to tax.
