Page 32 - GSTL_26th March 2020_Vol 34_Part 4

J128 GST LAW TIMES [ Vol. 34
(1) Services by an employee to the employer in the course of or in relation to
his employment.
From the above amply clear that services being provided by an employee to em-
ployer in the course of employment does not qualify as supply and is not liable to
GST. Hence, the recovery of amount by the employee from the employer for prem-
ature notice period or amount paid by the employer to the employee for termina-
tion of employment is not liable to GST.
Thus, Services provided by an employee to the employer in the course of
or in relation to his employment are activities or transactions which shall be
treated as neither supply of goods nor supply of services under Schedule III of
Section 7 of the CGST Act, 2017.
Further, Schedule II of Section 7(5) of the CGST Act, 2017 prescribes ‘ac-
tivities or transactions to be treated as supply of goods or supply of services and
sub-clause (e) of Schedule II of Section 7(5) of the CGST Act, 2017 states that :
“(e) agreeing to the obligation to refrain from an act, or to tolerate an act or
a situation, or to do an act.”
The cited provision of Section 7(5)(e) of Schedule II prescribes agreeing to the obli-
gation to refrain from an act or tolerance an act or a situation or to do an act does
not qualify as supply of services. So any act or transaction against consideration is
supply of services.
Section 2(31)(b) of CGST Act, 2017 defines consideration in relation to the
supply of goods or services or both includes -
(a) any payment made or to be made, whether in money or otherwise, in
respect of, in response to, or for the inducement of, the supply of
goods or services or both, whether by the recipient or by any other
person but shall not include any subsidy given by the Central Gov-
ernment or a State Government;
(b) the monetary value of any act or forbearance, in respect of, in re-
sponse to, or for the inducement of, the supply of goods or services or
both, whether by the recipient or by any other person but shall not in-
clude any subsidy given by the Central Government or a State Gov-
ernment :
Provided that a deposit given in respect of the supply of goods or
services or both shall not be considered as payment made for such
supply unless the supplier applies such deposit as consideration for
the said supply;
Now the moot question arises, whether monetary value or deduction of salary in
lieu of notice period by an employee is a consideration for an act of forbearance
and whether premature notice period payment made by employer can be consid-
ered to be consideration to be an act or tolerate an act or situation?
Notice pay recovery payment either by employer or by employee is
nothing but a deduction from the salary by employer for non-compliance of no-
tice period by employee or salary equivalent amount paid by the employer for
premature notice period given to the employee. But there is no any distinct or
separate flow of consideration from the breach of contact rather it is only compli-
ance of a condition stipulated in the appointment letter executed between em-
ployer and employee at the time of giving employment.
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