Applicability of rcm on notice pay deduction of employee

Firstly Notice pay recovery from your employee is revenue for the company.

and As per provisions of GST, any recovery for non adherence to an agreement is a service provided and taxable under GST.

Since notice pay recovery is an amount recovered from employee for not adhering to serving Notice period as per employee agreement and hence same is taxable under GST.

Conclusion: Taxable under GST but it is forward charge I.e., sales income for company and hence sales invoice to be raised to employee.

The notice pay recovery is done for the employee if he is willing to leave from the employment early without serving the minimum period required by the employer to replace is position and is also stipulated in the contract of employment. Further, in such case the employer is tolerating the act of an employee leaving early and he charges notice pay recovery from the employee.Here there is no RCM but the employer have to pay GST as the supply made is in the nature of outward supply. Rate of tax applicable is 18%.  

GST @ 18% is applicable for the recovery amount. It doesn't come under employer and Employee relationship. The amount is collected for tolerating of leaving the organisation early than the prescribed notice period.