TMI BlogPayment of Servcie Tax on Notice pay recovery by employer.X X X X Extracts X X X X X X X X Extracts X X X X ..... Sir, As per letter of appointment, employees has to serve three (3) month notice period incase of resignation but if they do not serve entire three (3) months period, then the employer company deduct as notice pay recovery equal to three (3) months basic salary or basic salary for balance period from full and final settlement of employee. querry : 1) Whether employer company need to pay service tax on notice pay recovery ? 2) Whether the notice pay amount so recovered will be treated as including Service Tax or Excluding Service Tax ? 3) Whether the employer company need to raise an Invoice to resigned employee ? 4) Under which head the employer company should deposit Service Tax? 5) Under which category the service shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be incorporated in Service Tax Registration Certificate ? Thanks in advance. Ashwin Garg - Reply By PAWAN KUMAR - The Reply = dear sir, as per my view, no service tax is liable on such recovery, as no service involve. - Reply By MARIAPPAN GOVINDARAJAN - The Reply = As told by Mr. Pawan Kumar question of service and service tax do not arise. - Reply By Akash Deep - The Reply = Dear Sir, at the most your transaction may be coveredunder section 66E(e) i.e. agreeing to the obligation to refrain from an act or to tolerate an act or situation or to do an act. However, to fall under this, act has to be an stand alone act. it must not be an act which is an aftermath of another contract between parties. Exercise of rights by a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y arising out of contract in the event of default by other party can not be treated as an independent Act. Further, deducting money as penalty can never be equivalent to consideration received in the event of provision of a service. transactions is not a service. Akash deep - Reply By Pradeep Khatri - The Reply = Dear Ashwin, No service tax would be applicable on the transactions where employee relationship do exist. Regards, Neelam Taneja (Executive Consultants) YAGAY and SUN (Management, Business and Indirect Tax Consultants) - Reply By Ashok Patil - The Reply = No employer - employee relationship exists on termination of employment contract and tolerating an act of breach of contract will fall under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declared services u/s 66E(e) , as such service tax will be applicable. - Reply By PAWAN KUMAR - The Reply = Dear Sir, As per my view : 1. In the instant case no activity involved, as no service as per clause 44 of 65B . therefore no liability of service tax. 2.This is only an transaction relatable to money or actionable claim. 3. The same is covered under the provision of service by an employee to the employer in the course of or in relation to his employment. 4.It will never cover under section 66(E)(e) . No service tax is leviable on such notice pay amount. - Reply By Ashok Patil - The Reply = Please refer the definition of Service which has two parts Any activity carried out by a person for an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other for consideration and Includes a declared service It implies that the declared services may or may not involve any activity as such still those services will fall under the tax net. Also, as I already mentioned above, on termination of employment of service by whatever reason, no employer employee relations exists as such any compensation as an obligation to tolerate an act or a situation will be covered under the declared services. - Reply By Pradeep Khatri - The Reply = Dear All, Please go through this draft circular and thanks to God that it is still a draft circular and has not become the law F. No.354/127/2012-TRU . Hence, no service tax. Neelam Taneja , (Executive Consultant) YAGAY and SU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N Management, Business and Indirect Tax Consultants) - Reply By Naveed S - The Reply = Hi All, It is a fact that one of the ingredients for the service tax payment is that an activity should have been provided for a consideration. Where the employees pays for such services or where the amount is deducted from the salary or a portion of the salary foregone by the employee Such activity will also be considered as having been made for a consideration and thus liable for tax. As per the new service tax law post negative era, services provided by an Employee to Employer is exempt, however service provided by Employer to Employee is taxable and service tax liable to be paid. In the current situation, it is deemed to be a service p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided by Employer to Employee, hence the same is taxable. It is an income in the hands of the employer and therefore employer has to pay service tax thereon. - Reply By Ashok Patil - The Reply = Perfect......... Agree with Naveed - Reply By MUKUND THAKKAR - The Reply = well explain by naveedji.. 100% - Reply By Naveed S - The Reply = Thanks to all for the love and support. - Reply By KASTURI SETHI - The Reply = Sh.Ashwin Garg Ji, Someone has asked me to comment on this issue. So my views are as under:- I am of the view that ST is not applicable in such a situation. I concur with the experts, namely, Sh.Pawan Kumar, Sh.Akash Deep, M/s.Yagay and Sun and Sh.Govindarajan.The very much basis of rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overy of three months' pay from employee by employer Co. is the upshot of 'appointment letter' issued by the Co. So relationship has not vanished. It is appointment letter and not contrac t.There is a gulf of difference between 'Appointment Letter' and 'Contract'. Service does not exist.Since contract not does not exist, Section 66 E (e) is not applicable to this situation. - Reply By KASTURI SETHI - The Reply = Correction. Pl. read the word, an offshoot' instead of 'upshot'. Offshoot is proper word here. - Payment of Servcie Tax on Notice pay recovery by employer. - Query Started By: - Ashwin Garg Dated:- 4-1-2015 Service Tax - Got 14 Replies - Service Tax - Discussion Forum - Knowledge S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haring, reply post by an expert, personal opinion Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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