Aggregate Turnover

[Sanjeev Agrawal]

Hello respected members. Actually my query is that whether an assessee needs to pay gst if its has been running cold storage of potatoes only till date and now it has started to provide rental service to a sister concern belonging to the assessee's family members, only because its aggregate turnover i.e. cold storage receipts and rent receipts would be exceeding the threshold limit provided in the gst provisions?

[Ganeshan Kalyani]

Sir, the aggregate turnover includes exempt supplies as well. So, for registration purpose you need to account the storage turnover of potatoes as well.

[Ganeshan Kalyani]

Sec. 2(6) “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess;

[YAGAY andSUN]

The applicability of GST on rental services provided by your client largely depends on the aggregate turnover, which includes both their existing cold storage receipts and the new rental income.

1. Cold Storage Services: Under GST, cold storage services provided for agricultural produce, like potatoes, are generally exempt from tax. This means that the income your client receives for storing potatoes does not attract GST.
2. Rental Income: Now, when your client starts renting out the cold storage facility to a sister concern, it falls under the category of renting of immovable property. While GST does not apply to rental income for residential properties, it does apply to commercial property rentals. Therefore, the rental income from the sister concern will be subject to 18% GST, provided the client’s aggregate turnover exceeds the threshold limit of ₹20 Lakhs (or ₹10 Lakhs in special category states).
3. Threshold Limit for GST Registration: If the total turnover (including cold storage receipts and rental receipts) exceeds the prescribed threshold limit, your client will be required to register for GST. Once registered, they will need to charge GST on the rental income at the rate of 18%.
4. GST on Related Party Transactions: The fact that the rental income is being charged to a sister concern does not change the GST implications. Transactions between related parties are treated as a supply of service, and GST is applicable accordingly. Therefore, even though the tenant is a related party, the rental service will still attract GST, and your client will need to comply with the relevant registration and filing requirements.

Summary:

• The cold storage services for agricultural produce are exempt from GST.
• Rental income from the cold storage facility is subject to 18% GST if the client’s aggregate turnover exceeds the GST threshold limit of ₹20 Lakhs (or ₹10 Lakhs in special category states).
• Once the threshold limit is crossed, your client must register for GST and charge GST on the rental income, regardless of the fact that the rental is being provided to a sister concern.

In essence, GST will apply to the rental income if the total turnover exceeds the prescribed limit, and the client will need to ensure they meet the GST compliance requirements.

I hope this version works for you. It's written in a straightforward, business-oriented style and should help in understanding the matter clearly while remaining neutral and professional. Let me know if you'd like to make any further adjustments!

[Sanjeev Agrawal]

is interest free security deposit a solution in place of charging rent from the sister concern for the assessee?

[Shilpi Jain]

If your related sister entity is eligible for full ITC then any value you can charge on the invoice issued for the supply.

So there is a possibility to take it as a security deposit.

[YAGAY andSUN]

In response to your query, while charging rent to a sister concern would attract GST if the aggregate turnover exceeds the prescribed threshold, an interest-free security deposit could potentially be a solution to avoid the rental income issue. However, it's important to note that the interest-free security deposit is not considered income and thus would not attract GST. The key point is that GST is levied on the consideration for the supply of services, such as rent. Therefore, if no actual rent is charged and only a security deposit is taken, there would be no GST liability on the transaction, provided the deposit is genuinely non-refundable and does not represent advance rent.

However, the issue lies in ensuring that the arrangement is structured appropriately and that the security deposit is not re-characterized by authorities as rent or an advance for rent. If the sister concern is merely depositing a refundable security deposit and no rent is being charged, there should be no GST on the deposit. Still, any future rent charges or consideration paid by the sister concern would be subject to GST if the turnover exceeds the threshold limit. Always ensure that the agreement and documentation around such arrangements are clear to avoid any potential GST implications.

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AI Summary

Cold Storage Services: Navigating GST Exemptions and Rental Income Thresholds for Interconnected Business Entities A business operating a cold storage facility for potatoes is considering providing rental services to a sister concern. The key concern is GST applicability based on aggregate turnover. If total turnover exceeds the threshold limit (Rs. 20 Lakhs), GST registration becomes mandatory. Cold storage services for agricultural produce are exempt, but rental income may attract 18% GST. An interest-free security deposit might be a potential alternative to avoid direct rental charges.