Date of order: 18 October 2022

Facts:

• The applicant, M/s Rites Limited, is a Public Limited Company under the Companies Act, 1956 and is governed by a Board of Directors which includes persons of eminence from various sectors of engineering and management. 
• The Applicant as per the employment contract if the employee is unable to serve the stipulated notice period, then in such cases, the Applicant company recovers an amount as Notice Pay or deducts the said amount from the salary of the employee in lieu of the notice period which has remained un-served by the said outgoing employee. It is in the nature of a compensation for the breach of the terms of the Employment Agreement.
• The Applicant also recovers towards canteen charges, loss/replaced ID cards, delay in completion of contract, forfeiture of earnest money, and in certain cases written off creditors amount in books of account.  

Issue:

• Whether recovery from the employees and contractors is leviable to GST ?

Order:

Notice pay recovery

• The authorities observed that as per Circular dated 03 August 2022, it has been clarified that notice pay recovery is not leviable to GST.

Canteen recovery

• The authorities observed that transaction/ deduction of nominal amount from the salary of the employees at fixed rate is outside the purview of taxability under GST.

Replaced/ Lost ID card recovery

• The authorities observed that applicant uses the in-house printing facility for the services i.e. re-issuance of identity cards to the employees. Fee of Rs. 100 per card is charged for re-issuance by the applicant form its respective employee for issuance the new identity card. No third party contractor is availed for the printing of Id-cards. In this matter, the authority was of view that this transaction does not fall under the taxable event under the GST as it’s covered under the schedule III(1) appended with the CGST Act, 2017 

Transaction of liquidated damage charged due to delay in completion of work and forfeiture of Earnest Money/ Bank Guarantee /Security Deposit.

• The authorities observed that factual as well as legal detail of the transactions of the matter is examined by us along with the details of the copy of Tender flouted/issued by the applicant company for the works. The authority was of view that the matter stands clarified in the circular dated 03.08.2022 of the Board. It’s decided accordingly. GST is not leviable on the same.

Amount written off in the books of account as creditors balance

• The authorities observed that there are no services received or provided by the Applicant Company in this situation. The same is an income and not a supply and outside the ambit of GST.