Interest income shall be considered for the purpose of calculating the aggregate threshold limit in terms of Section 22, for obtaining registration under GST.

Facts: In the instant matter, Shree Sawai Manoharlal Rathi, the applicant, is not engaged in any business but earns interest from savings, personal loans and advances and deposits, and also has renting income from immovable property. His income included Rental income Rs.9, 84,000/-, Bank interest Rs.3, 000/-, Interest on PPF depositRs.2, 76,000/- and Interest on Personal Loans and Advances Rs.7,49,000/-.Thus the aggregate total income was estimated to Rs 20, 12,000/-.

So a question was raised whether the said income of interest would form part of aggregate turnover for calculating threshold limit of Rs 20.00 Lakh for registration under GST law. 

Issue: Whether interest receipts be considered for the purpose of calculating the aggregate threshold limit of Rs. 20.00 Lakhs for registration under GST Law.

Held: The Authority for Advance Rulings ruled that going by the definition of “aggregate turnover”, the Applicant is required to consider the value of both the taxable supply as well as exempt supply. The aggregate receipts of the applicant in the instant case are Rs 20.12 Lakhs i.e exceeding the threshold for registration. So he will liable to pay GST on the taxable turnover of rental income of Rs 9.84 Lakhs and balance amount of interest income Rs 10.28 Lakhs will be considered as exempt income not liable to GST. 

The AAR held that the interest received from PPF, personal loans and advances to family members, Interest on Saving Bank account would be considered for the purpose of calculating the threshold limit of Rs.20.00 Lakh for registration under the GST Law.

Relevant provisions of the GST Law

Section 2(6) of the Central Goods & Services Tax Act, 2017 defines the term “aggregate turnover” as under:-

“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.”

Exempt supply” is defined under Section 2(47) of the CGST Act, 2017 as –

“Exempt Supply” means supply of any goods or services or both which attracts nil rated of tax or which may be wholly exempt under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes Non- Taxable supply.”

Section 7 of the Central GST Act, 2017 prescribes scope of the term “Supply” which includes sale, transfer, exchange, barter, license, rental, lease and disposal. If a person undertakes either of these transactions during the course or furtherance of business for consideration, it will be covered under the meaning of Supply under GST.

Entry 27(a) of the Notification No. 12/2017 – Central Tax (Rate) and Entry 28(a) of the Notification No. 9/2017- Integrated Tax (Rate) dated 28.06.2017 relates to services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest. Therefore, activity of providing services by way of extending deposits, loans or advances where the consideration is represented by way of interest is exempt from GST.

To read the complete judgment 2020 Taxo.online 1060