HC allows refund of GST paid on notice pay recovery

The Petitioner’s refund of GST paid on the notice pay received from the erstwhile employee was rejected. Aggrieved the Petitioner preferred a Writ before the Kerala HC for seeking refund of GST paid on notice pay recovery.

The HC observed that Circular No. 178/10/2022-GST dated 03, July 2022, had expressly clarified that the notice pay from employees is not a taxable transaction. Further, the HC also noted that while the Circular was issued after the issuance of impugned order, the Revenue cannot deny the benefits entitled to the Petitioner, since the provisions of a Circular have to be deemed to apply retrospectively. Furthermore, as the Circular are binding on the Department, no officer can take a view contrary to stipulations contained in such Circulars. Accordingly, the impugned order was quashed.

Manappuram Finance Limited [2022-VIL-807-KER]

GLS Comments:

Vide the Circular dated 03 July 2022, the position had become amply clear that GST is not leviable on notice pay recovery. Moreover, it is a settled legal principle that the circulars are clarificatory in nature and therefore, such clarifications apply retrospectively. Thus, the Revenue ought to have granted the refund to the Petitioner in the instant case. Nonetheless, now that the HC has expressly held so, the taxpayers, who have paid GST on notice pay recoveries, may apply for refunds.

Disclaimer:

The information provided in this update is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This update is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary to the views mentioned hereinrra quis.