Non-compete agreements during acquisitions that restrict the seller from starting a new venture for some time or poaching employees and customers, have attracted the taxman’s attention. According to the tax department, a non-compete agreement is essentially a service provided by the seller of the business to the buyer. Several private equity firms, strategic investors and others that have bought businesses and entered into these contracts with the sellers have received notices that they need to pay goods and services tax at 18% on the non-compete fee. In the GST framework, even an agreement to abstain from an economic activity for a consideration is deemed to be a service and must be taxed. In M&A situations, the issue that the tax department may seek to levy GST on non-compete fees has been coming up in the recent past. In many cases, this cost has not been accounted for and now the question is who will bear this cost. With various industries looking for relief from the government on multiple ongoing issues, notices on non-compete fee are certainly expected to raise a few eyebrows.