Need for registration under CGST Act

[Lalitha Krishnamurthy]

A client (Individual) has income from Bank Fixed Deposits (which is exempt) and renting of commercial property to a registered entity (which is taxable on reverse charge basis). Though the aggregate income is more than Rs. 20 lakhs, he is not liable to pay tax under GST laws. Under the circumstances, is he required to register himself and file nil returns? Section 23(1)(a) of the CGST Act provides for exemption from registration to persons who are only engaged in making exempt supplies while Notification no. 5/2017 - Central Tax dated 19/06/2017, as amended by Notification no. 24/2024 - Central Tax dated 09/10/2024 provides for exemption from registration to persons who are only engaged in supplies subject to tax on reverse charge basis. In our opinion, registration is not required when the provisions are read together; would be grateful if the experts could confirm this. Thank you.

[Sanjeev Agarwal]

On the stated facts, I would support the non-registration position, subject to the character of the FDR interest.

Technical position

The starting point should be Section 7 of the CGST Act, rather than treating FDR interest automatically as an exempt supply.

Where an individual merely invests his personal funds in bank FDRs, without carrying on any business of lending or financing, there is a strong basis to contend that the interest is not a "supply" made in the course or furtherance of business. Accordingly, it should not form part of aggregate turnover under Section 2(6) merely because it constitutes income.

This distinction is critical:

A receipt outside the scope of "supply" is different from an exempt supply.

The commercial renting of the property is the individual's actual GST supply. Where the tenant is a registered person, GST on such renting is payable by the recipient under RCM.

Notification No. 5/2017-Central Tax, issued under Section 23(2), exempts persons who are only engaged in making supplies on which the whole tax is payable by the recipient under reverse charge.

Accordingly, if the FDR interest is outside Section 7 and commercial renting is the individual's only GST supply, the following position emerges:

Particular	Position
Personal FDR interest	Outside GST supply, subject to facts
Commercial rent	Taxable supply
GST on rent	Payable by registered tenant under RCM
Aggregate turnover	FDR interest excluded if not a supply
Registration	Not required under Notification 5/2017
GST returns	Not required merely because income exceeds Rs. 20 lakh

There is contrary AAR authority treating personal deposit interest as an exempt supply and including it in aggregate turnover. This creates litigation risk, but does not conclusively establish that every individual's FDR interest is a supply.

Conclusion

The stronger and cleaner argument is therefore not to combine Section 23(1)(a) and Notification 5/2017.

Rather:

Personal FDR interest is outside the scope of "supply" under Section 7; commercial renting is the individual's only GST supply; that supply is wholly subject to RCM in the hands of the registered recipient; consequently, Notification No. 5/2017 exempts the individual from GST registration.

This position is defensible provided the FDRs are genuinely personal investments and the individual is not carrying on any business of lending/financing.

[KASTURI SETHI]

In this scenario, registration is not required.

[Shilpi Jain]

First look at aggregate turnover - corsses 20L

Registration is required. Once registered, the liability to pay GST on commercial rent falls on supplier and not recipient.

Pls note that the RCM is attracted only if provided by unregistered person.

So u need to first see registration requirement in the light of FCM provisions. U cannot apply s 23 provisions and the RCM liability provision in this case since the registration status determines RCM applicable or not unlike say the services of advocate which are always RCM whether service povided by reg or unreg advocate.

In my view registration is required to be taken.

[Lalitha Krishnamurthy]

Many thanks to the experts M/s Sanjeev Agarwal, Kasturi Sethi and Shilpi Jain for their valued opinions.

AI Summary

GST registration for commercial landlords depends on whether personal deposit interest is a supply and enters aggregate turnover.
GST registration depends on whether personal bank fixed-deposit interest is outside the scope of supply or is an exempt supply includible in aggregate turnover. If the deposits are personal investments and commercial renting is the only GST supply, with tax wholly payable by the registered tenant under reverse charge, the exemption for exclusive reverse-charge supplies supports non-registration. The contrary view includes deposit interest in aggregate turnover, requires registration on crossing the threshold, and treats commercial rent as taxable under forward charge after registration.