Levy of GST— In the instant case, the applicant seeking advance ruling on GST applicability on salary recovery/STDR forfeiture.

The applicant is a registered tax payer as artificial judicial person registered under circle-1 Raipur engaged in the banking and financial service provision under HSN 00440173.

Whether, GST is payable on any amount recovered/forfeited from employees who are leaving the services without serving notice period/ resigning during probation period.

As the recover of salary in the instant case does not fall within the ambit of supply i.e. sale, transfer, etc. set out under sub-Section (1) of Section 7, and it being excluded activities or transaction of services by an employee to the employer in the course of or in relation to his employment as stipulated vide clause 1 of Schedule III, the conditions of Section 7 of CGST Act, 2017 is not satisfied and accordingly the transaction in question cannot be termed as a “supply” within the meaning of Section 7 and therefore, cannot be subjected to levy of GST.

The employee opting to resign by paying amount equivalent to one month's salary in lieu of notice has acted in accordance with the contract. The employee is free to tender his resignation, make payment of one-month salary and quit. Hence, there is neither any active nor any passive role played by the employee. The same is nothing but transactions pertaining to services by employee to the employer in the course of or in relation to the employment.  

Held that— GST is not payable on any amount recovered/forfeited from employees on account of their leaving the services without serving notice period/ resigning during probation period, it being excluded from the purview of “supply” as stipulated under Section 7 of CGST Act, 2017 as the same are activities or transactions of services by on employee to the employer in the course of or in relation to his employment as stipulated.