The war for talent is intensifying in many emerging industries in India. And so are some of the more mundane problems – tax treatment on money paid in lieu of serving the customary notice period.

GST shall apply to the recovery of the employee such that notice payment, group insurance and telephone bill, an advance authority of advance ruling (R) said.

The ruling said that in case of notice payment, the company is actually “providing a service” to an employee and hence GST should be applied on that. Under the GST framework, tax is levied on any activity that is treated as a supply of service—whether direct or deemed supply.

This tax complication comes at a time when the top companies complaining of high attrition, judgment in the case of India Oman Refineries The issue is set for scrutiny by the tax department in the coming months as there is already confusion on the issue.