Service Tax on Recovery of Notice Pay

[Bhairob Chandra Bor]

Dear Exparts,

as per service agreement we recover the notice pay from the employees who leaves the company with a short notices. In this case is the company liable to pay service tax as per the service tax rules? if applicable kindly advice sections/rules in which it is mentioned. please also advice what will be in case of notice pay paid by company to its employees. Kindly advice.

Kind Regards.

BCB

AI Summary

Notice Pay Recovery Not Taxable Under Service Tax Rules, No Service Provided to Departing Employees A query was raised regarding the applicability of service tax on the recovery of notice pay from employees who leave a company without serving the notice period. The responses clarified that under the Finance Act, 1994 and the Service Tax Rules, such recoveries do not fall under taxable services. It was concluded that since the employee does not receive any service from the employer in lieu of notice pay, service tax is not applicable on these transactions.