No GST payable on Recoveries made from Employees towards providing Parental Insurance: AAR [Read Order]

The Maharashtra Authority of Advance Ruling (AAR) no GST payable on recoveries made from employees towards providing parental insurance.

The applicant, M/s Syngenta India Limited manufactures or sells pesticides, herbicides & various types of seeds and offers various incentives to its employees as a part of its employment policy, like group insurance policy for its employees, Parental Insurance Policy, etc. Applicant issues employment letter (Employment Agreement) to its employees, which contains various terms and conditions of employment. Applicant, in its General Employment Conditions (HR Policy) also mentions the terms and conditions related to work, responsibility, termination, etc.

The applicant has sought the advance ruling on the issue whether the GST would be payable on recoveries made from the employees towards providing parental insurance and whether the GST would be payable on the notice pay recoveries made from the employees on account of not serving the full notice period.

The coram of Rajiv Mangoo and T.R.Ramanani held that recovery of notice pay from dues of employee / payment of notice pay by the employee who could not serve the notice for the period as per contractual agreement or appointment letter does not amount to supply and therefore as per Section 7 (1A) of the CGST Act, 2017, the provisions of Schedule II does not come into play. Thus, also relying on the reasoning and decision given by the MPAAAR, mentioned above and the decision of the Madras High Court in W.P. Nos 35728 to 35734 of 2016 in the case of GE T&D India Ltd Vs Deputy Commr of Central Excise, LTU, Chennai, the AAR held that, the notice pay recovered by the applicant from its employees is not liable to GST.

The AAR held that GST would not be payable on the notice pay recoveries made from the employees on account of not serving the full notice period.

To Read the full text of the Order CLICK HERE

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