Service tax liability on notice pay collected from employees

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Jayaprakash S B (Querist)

28 October 2014 Dear Sir,

I need clarification on charging service tax on collection or recovery of notice pay amount from employees on leaving the organisation without serving for notice period after resigning.

Please give supporting's (as to notification, sections etc.) for your replies as I need to take it forward in my organisation.

Thanks in Advance.

Annu Agarwal

Annu Agarwal (Expert)

28 October 2014 No service tax shall be levied on noticepay as it is not the consideration for any service rendered.

@VaibhavJ

@VaibhavJ (Expert)

28 October 2014 As there is no provision in Service Tax to charge service provided by employee to employer, notice pay recovery can not be taxed.

Also it is recovery for not providing service so there is no question for paying ST on such amount for which service is in fact not rendered by employee.

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