Is GST applicable on service bond?


There is no need for you to pay GST (Goods and Services Tax) on the amount of the service bond. No GST applicable on service bond amount. Since such payment is part of the contract of an employer-employee relationship, no GST shall be applicable on it. You may not need to pay GST immediately as it is the responsibility of your employer to charge GST on the event when you do not comply with the terms and conditions of the bond i.e, if you resign before completion of 3 years in this particular firm.

Further, it depends on the HR policies of your firm that how they absolve this amount, if they are willing to pay from their own pocket. On legal aspects, yes, there are case laws in favour of employees that legal proceeding against the employees cannot be triggered due to lack of machinery provisions in the Contract laws in India for not fulfilling the bond’s terms and conditions but it is a matter of litigation.

However, Schedule III of the CGST Act, 2017 contains a list of supplies that will not be taxable under GST. Para I of Schedule III states services as ‘Services by an employee to the employer in the course of or in relation to his employment.’

Reference: Amendment 101 of The Constitution of India



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