Exempt Supply

[Ethirajan Parthasarathy]

The exempted supply for purpose of Rule 42 & 43 shall not include value of services by way of accepting deposits, extending loans or advances in so far as consideration is represented by way of interest or discount.

The exclusion is linked to consideration by way of interest or discount.

In view of this, my view is Rental / Security deposit (received / given) and staff loan given which are interest free will form part of exempted turnover both for purpose of arriving at “Aggregate Turnover” as well as for purpose of Rule 42 & 43.

Experts may give their view.

[SHARAD ANADA]

Examples given by you are all transactions in money. And transactions in money are not goods / services.

So in my view it's not exempt supply.

[Prasanna Kumar]

It is a fact that the value of services by way of accepting deposits, extending loans or advances, in so far as consideration is represented by way of interest or discount, are exempted from the levy of GST. Yes, partially, the exclusion is linked to consideration by way of interest or discount.

But the Rental / Security deposit (received / given) and staff loan given which are interest free can not be equated with the accepting of deposits or extending loans since there are many differences in the nature and features of these transactions itself. Rent or rental income is the associated expense or income with rental deposit. Rent or rental income is liable to levy of GST subject to certain conditions. As per definition under Section 2(47) Exempt Supply means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under Section 11, or under Section 6 if the IGST Act, and includes non-taxable supply. In my view rental deposit/security deposit cannot be treated as exempt income.

AI Summary

Exempt supply exclusion for interest-based deposit services clarified; interest-free rental and security deposits not automatically exempt. Exempt supply excludes services of accepting deposits or extending loans insofar as consideration is interest or discount; this exclusion hinges on the nature of the consideration. Opinions differ on whether transactions in money (such as rental/security deposits or interest-free staff loans) qualify as exempt supply: one view says monetary transactions are not goods/services and thus not exempt, while another argues that interest-free deposits and staff loans are distinct from deposit/loan services and rental deposits cannot be treated as exempt income.