2020 (6) TMI 449 - AAR - GST

Inclusion of Interest Income in Aggregate Turnover for GST Registration

In Re: Shree Sawai Manoharlal Rathi,

The Authority held that interest received from PPF, personal loans, advances, and saving bank accounts must be included in the aggregate turnover for GST ... Computation of threshold limit for the purpose of GST registration - Receipt of Interest on savings / loans - receipts in the course or furtherance of Business or not - scope of supply - Interest received in form of PPF - Interest received on Personal Loans and Advanced to family/friends - Interest received on Saving Bank Account - whether the interest should be considered for the purpose of calculating the threshold limit of ₹ 20.00 Lakh for registration under GST Law? HELD THAT:- The services regarding interest income are covered under the above Notification. Therefore, such services are exempted from payment of GST and the individual is not required to discharge GST on the activity of providing services by way of extending deposits, loans or advances where the consideration is represented by way of interest. Therefore, in given case GST is not leviable on Interest Income earned by the Applicant. The applicant is an individual with an annual turnover of more than ₹ 20 Lakh. Since this income is interest-related, the turnover is exempt from GST. However, the Applicant also supplies services of “Renting of immovable property” along with activity of providing services by way of extending deposits, loans or advances where the consideration is represented by way of interest. His turnover from the rent income is ₹ 9.84 Lakh and we know that this transaction (Renting of immovable property) is chargeable to GST. However, his taxable turnover is only ₹ 9.84 Lakh. Going by the definition of “aggregate turnover”, the Applicant is required to consider the value of both the taxable supply i.e. “Renting of immovable property” and exempted supply of service provided by way of extending deposits, loans or advances for which they earned interest income, to arrive at “Aggregate Turnover” to determine the threshold limit for the purpose of obtaining registration under the GST Act. The Applicant is required to aggregate the value of exempted interest income earned by way of extending deposits in PPF & Bank Saving accounts and loans and advances given to his family/friends along with the value of the taxable supply i.e. “Renting of immovable property” for the purpose of calculating the threshold limit of ₹ 20.00 Lakh for obtaining registration under GST law. The Interest received in form of PPF should be considered for the purpose of calculating the threshold limit of ₹ 20.00 Lakh for registration under GST Law - Interest received on Personal Loans and Advanced to family/friends should be considered for the purpose of calculating the threshold limit of ₹ 20.00 Lakh for registration under GST Law - Interest received on Saving Bank Account should be considered for the purpose of calculating the threshold limit of ₹ 20.00 Lakh for registration under GST Law. Issues:1. Whether interest received in the form of PPF would be considered for calculating the threshold limit of Rs. 20.00 Lakh for GST registrationRs.2. Whether interest received on personal loans and advances to family/friends would be considered for calculating the threshold limit of Rs. 20.00 Lakh for GST registrationRs.3. Whether interest received on a saving bank account would be considered for calculating the threshold limit of Rs. 20.00 Lakh for GST registrationRs.Analysis:Issue 1:The applicant contended that interest receipts from PPF, personal loans, and advances should not be considered for GST threshold calculation. The Authority reviewed the definition of 'aggregate turnover' under the CGST Act, which includes all taxable supplies, exempt supplies, and inter-State supplies. Exempt supplies cover nil rated supplies, wholly exempt supplies, and non-taxable supplies. The Authority clarified that interest income falls under exempted services as per relevant notifications. Therefore, the interest received in the form of PPF is to be included in the aggregate turnover for GST registration purposes.Issue 2:Regarding interest received on personal loans and advances to family/friends, the Authority emphasized that the definition of 'supply' under the CGST Act includes transactions made for consideration in the course or furtherance of business. However, services related to interest income are exempt from GST as per specific notifications. Hence, interest received on personal loans and advances should be considered for calculating the threshold limit of Rs. 20.00 Lakh for GST registration.Issue 3:The applicant argued that interest received on a saving bank account should not be aggregated for GST threshold calculation. The Authority examined the nature of supplies covered under aggregate turnover, emphasizing that supply is a taxable event for GST. Services related to interest income are exempt from GST as per notifications. Therefore, interest received on a saving bank account is to be included in the aggregate turnover for determining the threshold limit of Rs. 20.00 Lakh for GST registration.In conclusion, the Authority ruled that interest received in the form of PPF, personal loans and advances, and saving bank accounts should be considered for calculating the threshold limit of Rs. 20.00 Lakh for GST registration. The applicant must aggregate the value of exempted interest income along with taxable supplies to determine the aggregate turnover for GST registration purposes.